Allstate Sues Merrill Lynch for Fraud Over Mortgage-Backed Securities
Allstate Corp., the largest publicly traded U.S. home and auto insurer, sued Bank of America Corp.’s Merrill Lynch unit over claims it fraudulently sold the insurer about $167 million of residential mortgage-backed securities.
Allstate asked for damages including the lost market value of the securities, plus principal and interest payments in the complaint filed today in New York state Supreme Court. Allstate filed a similar lawsuit against Credit Suisse Group AG units yesterday in the same court over more than $231 million of the securities.
The insurer, based in Northbrook, Illinois, last month sued JPMorgan Chase & Co. over $700 million of mortgage-backed securities the bank sold the insurer; Citigroup Inc., over more than $200 million; and Deutsche Bank AG, over about $185 million. Allstate said the banks misrepresented underwriting standards, owner occupancy data and loan-to-value ratios.
“Because of the systemic abandonment of underwriting standards and the resulting inclusion of toxic, highly risky mortgage loans to back the certificates, most of Allstate’s certificates have been downgraded from the highest possible ratings to junk-bond ratings,” Allstate said in the Merrill Lynch complaint.
Bill Halldin, a spokesman for Charlotte, North Carolina- based Bank of America, had no immediate comment on the lawsuit.
The case is Allstate Insurance Co. v. Merrill Lynch, 650559/2011, New York state Supreme Court, New York County (Manhattan).
To contact the reporter on this story: Karen Freifeld in New York at kfreifeld@bloomberg.net.
To contact the editor responsible for this story: John Pickering at jpickering@bloomberg.net.
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