Bank of America Sued by Countrywide Financial Investors Alleging Fraud
Bank of America Corp. (BAC), the biggest U.S. lender, faces a new securities-fraud lawsuit filed by former Countrywide Financial Corp. investors including BlackRock Inc. that opted out of a $624 million settlement last year.
Countrywide, acquired by Bank of America in 2008, misled shareholders about its finances and lending practices, according to the complaint filed today in federal court in Los Angeles. Plaintiffs including the California Public Employees’ Retirement System and funds managed by BlackRock, T. Rowe Price Group Inc. and TIAA-CREF are the largest group of those who rejected the deal, saying the terms were inadequate.
“These prominent institutional investors made every effort to amicably resolve their claims for recovery of damages caused by the massive and pervasive fraud at Countrywide without filing formal litigation, but were unsuccessful,” their attorney, Blair Nicholas, a partner at Bernstein Litowitz Berger & Grossmann LLP, said in an e-mail. The investors hope to “maximize” their returns in a jury trial, he said.
For Bank of America Chief Executive Officer Brian T. Moynihan, 51, the suit is the latest challenge resulting from his predecessor’s purchase of Countrywide. The lender agreed last month to pay $8.5 billion to settle disputes from bondholders, including New York-based BlackRock, over defective Countrywide mortgages, contributing to a record $8.83 billion second-quarter loss.
In February, U.S. District Judge Mariana Pfaelzer in Los Angeles approved the class-action settlement, which included $22.5 million that was set aside for possible separate accords after about 30 members withdrew. Investors may choose to opt out of a class action to seek more money in separate lawsuits, as did retirement funds from Michigan, Oregon and California.
The case is In re Countrywide Financial Corp. Securities Litigation, 11-cv-06239, U.S. District Court, Central District of California (Los Angeles).
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