Another investor lawsuit was filed last month against Bank of America Corp., again by investors. The Plaintiffs, 15 former Countrywide Financial Corp. institutional investors, lost money after being misled about the mortgage lender’s financial condition and lending practices. BlackRock Inc., the California Public Employees’ Retirement System (CalPERS), T Rowe Price Group Inc., TIAA-CREF and the other Plaintiffs, including some in Europe, filed the suit in Los Angeles federal court. They had elected not to join the $624 million settlement referred to above which had won court approval in February.
These Plaintiffs believed they would do much better by suing on their own over the “massive and pervasive” fraud at Countrywide, which Bank of America bought on July 1, 2008. This lawsuit deepens the legal problems for Bank of America over Countrywide, for which it paid $2.5 billion. It has been estimated that its ultimate cost, including legal bills and loan losses, could easily exceed ten times that amount.
The lawsuit contends top executives at Bank of America “were fully aware of but failed to disclose, and in fact expressly authorized and engaged in, Countrywide’s risky lending.” Countrywide shares ultimately sank more than 90% from their peak as losses from its subprime, pay-option and other risky mortgages began to pile up. The Plaintiffs seek damages and class-action status for the March 12, 2004 to March 7, 2008 period in the lawsuit filed in the Central District of California. Other Defendants include former Chief Operating Officer David Sambol and former Chief Financial Officer Eric Sieracki, and former auditor KPMG LLP.
The February 25th settlement, which was approved by U.S. District Judge Mariana Pfaelzer in Los Angeles, calls for Bank of America to pay $601.5 million to former Countrywide investors, and to set aside $22.5 million for claims of investors that opted out. That money would go to investors in the earlier settlement if it is not used within two years. Mozilo last October reached a $67.5 million settlement of a U.S. Securities and Exchange Commission civil fraud lawsuit accusing him of misleading investors and generating improper gains from stock sales. Bank of America shares have fallen close to 60% since it bought Countrywide, roughly three times as much as the KBW Bank Index. Blair Nicholas, a partner at Bernstein Litowitz Berger & Grossmann, a national firm with an office in San Diego, Calif., represents the Plaintiffs in this lawsuit and has done a good job so far.
Source: Insurance Journal
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