The Resolution Law Group: Bank of America’s Countrywide to Pay $17.3M RMBS Settlement to Massachusetts

According to Massachusetts Attorney General Martha Coakley, Countrywide Securities Corp. (CFC) will pay $17 million to settle residential mortgage backed securities claims. The settlement includes $6 million to be paid to the Commonwealth and $11.3 million to investors with the Pension Reserves Investment Management Board. Countrywide is a Bank of America (BAC) unit.

Coakley’s office was the first in the US to start probing and pursuing Wall Street securitization firms for their involvement in the subprime mortgage crisis. Other RMBS settlements Massachusetts has reached include: $34M from JPMorgan Chase & Co. (JPM), $36M from Barclays Bank (ADR), $52 million from Royal Bank of Scotland (RBS), $102 million from Morgan Stanley (MS), and $60 million from Goldman Sachs. (GS).

Meantime, a federal judge is expected to rule soon on how much Bank of America will pay in a securities fraud verdict related to the faulty mortgages that Countrywide sold investors. A jury had found the bank and ex-Countrywide executive Rebecca Mairone liable for defrauding Freddie Mac and Fannie Mae via the sale of loans through that banking unit. The US government wants Bank of America to pay $863.6 million in damages. Mairone denies any wrongdoing.

The case focused on “High Speed Swim Lane,” a mortgage lending process that rewarded employees for the volume of loans produced rather than the quality. Checkpoints that should have made sure the loans were solid were eliminated.

In other recent Countrywide news, a federal judge has given final approval to Bank of America’s $500 million settlement with investors who say the unit misled them, which is why they even invested in high-risk mortgage debt. A number of investors, including union and public pension funds, said they were given offering documents about home loans backing the securities that they purchased and that the content of this paperwork was misleading. They contend that a lot of securities came with high credit ratings that ended up falling to “junk status” as conditions in the market deteriorated.

This payout is the biggest thus far to resolve federal class action securities litigation involving mortgage-backed securities. The second largest was the $315 million reached with Merrill Lynch (MER), which is also a Bank of America unit. That agreement was approved in 2012.

Also, Bank of America was recently named the defendant in a lawsuit filed by the California city of Los Angeles over allegedly discriminatory lending practices that the plaintiff says played a part in causing foreclosures. LA is also suing Citigroup (C) and Wells Fargo (WFC).

The city says that Bank of America offered “predatory” loan terms that led to discrimination against minority borrowers. This resulted in foreclosures that caused the City’s property-tax revenues to decline. BofA, Wells Fargo, and Citibank have said that the claims are baseless.

If you feel you are the victim of Securities Fraud, please do not hesitate to email or call the The Resolution Law Group (203) 542-7275 for a confidential, no obligation consultation.

The Resolution Law Group: Merrill Lynch Settles with SEC Over CDO Disclosures for Almost $132M

The Securities and Exchange Commission says that Merrill Lynch Pierce Fenner & Smith Inc. (MER) will pay $131.8M to settle charges involving allegedly faulty derivatives disclosures. The regulator claims that the firm, which is the largest broker-dealer by client assets, misled investors about certain structured debt products before the economic crisis. By settling, Merrill is not denying or agreeing to the allegations. Also, the brokerage firm was quick to note that the matter for dispute occurred before Bank of America (BAC) acquired it.

According to the Commission, in 2006 and 2007 Merrill Lynch did not tell investors that Magnetar Capital impacted the choice of collateral that was behind specific debt products. The hedge fund purportedly hedged stock positions by shorting against Norma CDO I Ltd. and Octans I CDO Ltd., which are two collateral debt obligations that the firm was selling to customers.

The SEC contends that Merrill used misleading collateral to market these CDO investments. According to Division of Enforcement co-director George Canellos, the materials depicted an independent process for choosing collateral that benefited long-term debt investors and customers did not know about the role Magnetar Capital was playing to choose the underlying portfolios.

Also sanctioned by the SEC were Joseph Parish and Scott Shannon, two managing partners of IR Capital Management LLC. This was the investment adviser that took care of choosing collateral for the CDO Norma. They are accused of compromising their supposed lack of bias by letting a third party with its own interests affect the portfolio-selection process. The SEC says Shannon accepted assets that Magnetar chose while Parish let the hedge fund impact how other assets were selected. The two men will pay over $472,000 to settle the allegations against them and they were suspended from the industry.

Meantime, the US government continues to pursue Wall Street firms over their alleged misconduct involving the mortgage-backed securities creation that is attributed to helping cause investor losses during the financial crisis and the housing slump. The SEC has also pursued claims against Citigroup Inc. (C), Goldman Sachs Group Inc. (GS), and JPMorgan Chase & Co. (JPM) over their involvement in structuring and promoting investments linked to home loans that were faulty.

If you suspect that you have been the victim of securities fraud, contact The Resolution Law Group’s CDO fraud lawyers today.  The Resolution Law Group represents investors with securities claims against financial firms, investment advisers, brokerage firms, brokers, and others. Contact our securities fraud law firm.

The Resolution Law Group: AIG Settles Ex-Executive’s $274M Lawsuit Over Alleged Failure to Pay Him During 2008 Economic Crisis

American Insurance Group (AIG) and one of its ex-executives, Kevin Fitzpatrick, have reached a settlement deal over his $274 million lawsuit against the insurer. Fitzpatrick, the former president of the AIG Global Real Estate Investment Corp. unit, claims that his then-employer would not pay him during the 2008 economic crisis. The insurer’s refusal to pay occurred not long after the US government said yes to the first part of what would turn into a $182 billion bailout.

Fitzpatrick, who worked for AIG for 22 years, said that AIG breached agreements it had with him and entities under his control. He claims the agreements entitled him to a share of profits made on the insurer’s real estate investments but that on October 2008 AIG stopped paying him and others who were entitled to profit distributions. Fitzpatrick then quit.

Fitzpatrick sued in 2009, claiming that AIG owed him $274 million and that he wanted interest and punitive damages, which is right around the time that the insurer was trying to get past public disapproval over $165 million in bonuses that were paid to employees in the AIG Financial Products unit. That is the group that handled the complex financial instruments that led to its huge losses.

AIG denied wrongdoing and said that Fitzpatrick was paid what he was owed. The insurer contended that Fitzpatrick actually was fired and that he stole data that was confidential and belonged to the company.

In other AIG-related news, a district court judge just threw out a shareholder lawsuit accusing Bank of America (BAC) of not telling them that the insurer was planning to sue the bank with a $10 billion fraud lawsuit. AIG accused Bank of America of misrepresenting the quality of more than $28 million of MBSs that AIG bought from the latter and its Countrywide and Merrill Lynch (MER) units.

Also, there are reports that AIG might file mortgage-backed securities case against Morgan Stanley (MS) over $3.7 billion of MBS.

If you feel you are the victim of Securities Fraud, please do not hesitate to email or call the The Resolution Law Group (203) 542-7275 for a confidential, no obligation consultation.

The Resolution Law Group: Judge Dismisses Shareholder Lawsuit Suing Bank of America For Allegedly Concealing AIG Fraud Case

A judge has thrown out a securities lawsuit by shareholders accusing Bank of America Corp. (BAC) of concealing that insurer AIG (AIG) intended to file a $10 billion fraud case against it. U.S. District Judge John Koeltl in Manhattan said that BofA and four of its officers were not obligated to reveal in advance that the lawsuit was pending or that it was a large one.

AIG filed its securities fraud lawsuit against Bank of America in 2011. The insurer claimed that the bank misrepresented the quality of over $28 billion of mortgage-backed securities it purchased not just from the bank but also from its Merrill Lynch (MER) and Countrywide units. On the day that the complaint was filed, shares of Bank of America dropped 20.3% and Standard & Poor’s revoked the tripe-A credit rating it had issued.

The shareholder plaintiffs claim that the bank’s officers, including Chief Executive Brian Moynihan, knew about the MBS fraud case six months before the lawsuit was submitted and they should have given them advance warning.

Judge John Koeltl, however, said that the specifics about the securities case did not materially differ from what Bank of America already disclosed in its mortgage exposures. He also determined that the bank did not issue inaccurate or incomplete statements.

AIG’s mortgage-backed securities lawsuit is still pending.

Meantime, the media is reporting that the AIG may be getting ready to file another MBS fraud case, this one against Morgan Stanley (MS). The case would be over the $3.7 billion of mortgage securities that the bank sponsored and underwrote between 2005 to 2007 that AIG then bought. The insurer has submitted a regulatory filing about its plans to possibly file. AIG ended a “tolling agreement” with the firm that would have allowed them to resolve their disagreement outside a courtroom.

The Resolution Law Group’s mortgage-backed securities lawyers represent institutional and individual investors that have sustained financial losses because of securities fraud. Contact our MBS fraud law firm today.

Judge Dismisses Suit Against Bank of America For Not Disclosing AIG Claims, Insurance Journal, November 4, 2013

The Resolution Law Group: Five Years After Lehman’s Bankruptcy, How is the US Financial System Doing Now?

It was nearly five years ago on September 15, 2008 when the public learned that Lehman Brothers had gone bankrupt, resulting in billions of dollars of losses on a financial system already struggling with a housing market that was failing, as well as a growing credit crisis. Also, Merrill Lynch (MER) would be forced to join with Bank of America (BAC), the US car industry was in trouble, and insurer AIG stood on the brink of collapse. Now, while there has the economy has somewhat recovered, many Americans can’t help but worry that such a financial meltdown could happen again.

Back then, Wachovia (WB) was also in peril of going down and Washington Mutual (WAMUQ) was failing miserably—to become the biggest US banking failure to date—and government and financial industry leaders scrambled to save what they could. Bailouts were issued and emergency measures taken including: a federal takeover of housing finance giants Freddie Mac and Fannie Mae, which kept the housing market going by allaying worries that the two entities would default on bonds,the guaranteeing of money market mutual funds that the then-trillion dollar industry depended on for the business short-term funding as well as retirement, and the setting up of the Troubled Asset Relief Program (allowing the Treasury to help put back confidence in banks via the buying of equities of securities in many of these banks and recapitalizing the system.

In a USA Today article, ex-US senator Christopher Dodd said that he believes there will be another crisis; only this one could also involve China, Brazil, and India—not just the US and the European continent. Meantime, while US Chamber of Commerce’s Center for Capital Markets Competitiveness CEO and President David Hirschmann said that a crisis as big as the one in 2008 is not as likely, he predicts there will still be failures. He also said that it is unclear whether we’ve established a better system for identifying problems and risks.

In August, US President Obama delineated a proposal to rework the country’s housing finance-system, which would phase out Freddie and Fannie. While putting them under government control a few years back provided some reprieve, this was never meant to be permanent solution to the problems that happened.

Also in the article, ex-US Treasury Secretary Henry Paulson said he wants broader industry reform and while he believes the Dodd-Frank Wall Street Reform and Consumer Act is a big move n the right direction, he expressed the need for a reworking of the federal financial regulatory agencies and a closer examination of their duties, which sometimes overlap. There also have been calls from government watchdogs for reforms to the biggest US banks because of concerns that their interrelatedness and complexities make them an ongoing risk to the financial system.

If you feel you are the victim of Broker Fraud, please do not hesitate to email or call the The Resolution Law Group (203) 542-7275 for a confidential, no obligation consultation.

 

The Resolution Law Group: NY AG’s ARS Lawsuit Against Charles Schwab & Co. Are Revived by Appeals Court

A New York Appellate Division’s panel has unanimously agreed to revive the state attorney general’s auction-rate securities lawsuit against Charles Schwab and Co. (SCHW). The 2009 securities case accuses the financial firm of committing fraud in its sale and marketing of the financial instruments. The decision reverses a state judge’s ruling to throw out the complaint.

According to the NY ARS lawsuit, the broker-dealer’s brokers made false representations that the securities were safe and liquid. In a 4-0 decision, the appeals panel said that the state had given enough evidence to merit a trial on two claims submitted per its Martin Act, a 1921 law that gives the attorney general of New York the ability to prosecute fraud without proof of intent. Under the law fraud is defined as acts that involve misleading or fooling the public.

Per the panel’s ruling, the claims are revived only as it pertains Schwab’s alleged misconduct before 9/5/07, which is when the first ARS sold by Schwab failed. The state wants the company to repurchase securities from customers and pay civil penalties and restitution.

However, the appeals court also upheld the dismissal of two claims not submitted under the Martin Act. It said that NY’s AG lacked standing to make them. Then-Attorney General Andrew Cuomo is the one that brought the lawsuit.

Unlike Merrill Lynch (MER), Citigroup (C), and UBS (UBS), Schwab was one of the brokerage firms that opted not to settle with Cuomo over ARS fraud claims. A Schwab spokesman maintains that the financial firm did not aggressively market auction-rate securities and that 98% of the ARS have ben redeemed from customers.

Auction-Rate Securities
ARS are long-term debt with interests that periodically reset via auctions. Banks fled the $330 billion auction-rate securities market in early 2008 and the market failed. Thousands of investors were left with illiquid securities they couldn’t sell even though financial representatives told them that the financial instruments were liquid, like cash.

Contact our ARS securities law firm today.

The Resolution Law Group: US gov’t accuses Bank of America of civil fraud in sale of $850M of mortgage bonds in 2008

WASHINGTONThe U.S. government has accused Bank of America Corp. of civil fraud, saying the company failed to disclose risks and misled investors in its sale of $850 million of mortgage bonds during 2008.

The Justice Department filed a lawsuit Tuesday against the bank and several subsidiaries in federal court in Charlotte, N.C., where Bank of America is based. The Securities and Exchange Commission filed a related lawsuit against Bank of America there, too.

Bank of America disputed the allegations.

The lawsuits accuse the second-largest U.S. bank of misleading investors about the risks of the mortgages tied to the securities.

And the government said the bank failed to tell investors that more than 70 percent of the mortgages backing the investment were written by mortgage brokers outside the banks’ network. That made the mortgages more vulnerable to default, they said. The bank disclosed the percentage of such mortgage loans in the investment only to a select group of investors, the suits alleged.

Bank of America could face monetary penalties. The government didn’t specify how much it is seeking, but it estimated that investors lost more than $100 million on the deal.

Bank of America’s CEO at the time described those mortgages as “toxic waste,” the SEC said.

“Bank of America’s reckless and fraudulent … practices in the lead-up to the financial crisis caused significant losses to investors,” Anne Tompkins, the U.S. attorney for the Western District of North Carolina, said in a statement. “Now, Bank of America will have to face the consequences of its actions.”

Bank of America said it will refute the government’s allegations in court.

“These were prime mortgages sold to sophisticated investors who had ample access to the underlying data and we will demonstrate that,” company spokesman Lawrence Grayson said in a statement. “The loans in this pool performed better than loans with similar characteristics (made and packaged into securities) at the same time by other financial institutions.”

“We are not responsible for the housing market collapse that caused mortgage loans to default at unprecedented rates and these securities to lose value as a result,” Grayson added.

The action was brought by a financial-fraud enforcement task force set up to pursue cases related to the 2008 financial crisis. The Justice Department lawsuit marks the most high-profile action brought by the Obama administration over conduct related to the financial crisis since the department sued credit rating agency Standard & Poor’s in February. That lawsuit alleged that S&P knowingly inflated its ratings of risky mortgage investments ahead of the crisis.

S&P, a unit of McGraw-Hill Cos., has rejected the allegations.

The actions against S&P and Bank of America followed years of criticism that the government had failed to do enough to hold accountable those companies that contributed to the crisis.

When the real estate bubble burst in 2007, home values plunged and millions of people defaulted on their mortgages and lost their homes. Investors who bought securities backed by high-risk mortgages lost billions. Regulators have said that inaccurate statements by banks in packaging and selling mortgage bonds contributed to the investors’ losses.

The lawsuit “marks the latest step forward in the Justice Department’s ongoing efforts to hold accountable those who engage in fraudulent or irresponsible conduct,” Attorney General Eric Holder said.

Bank of America received $45 billion in federal bailout aid during the crisis. It became one of the biggest players in the mortgage market through its acquisitions of Merrill Lynch and Countrywide Financial, which wrote many high-risk mortgages that contributed to the crisis.

Bank of America has been dogged by litigation largely as a result of those acquisitions. The bank has had to pay tens of billions of dollars to settle class-action lawsuits and previous actions brought by the SEC.

If you feel you are the victim of Mortgage Fraud, please do not hesitate to email or call the The Resolution Law Group (203) 542-7275 for a confidential, no obligation consultation.

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