Delaware Attorney General Beau Biden said yesterday he opposes the agreement and asked to intervene in the case to protect investors and preserve the state’s ability to pursue legal claims.
“I am intervening to enforce our laws and to protect Delaware investors who may have been harmed by these toxic securities,” Biden said in a statement. “Intervening in this settlement puts us in a position to ensure that the banks are playing by the rules.”
The settlement, which requires court approval, calls for Bank of America to pay $8.5 billion to resolve claims from investors in Countrywide Financial Corp. mortgage bonds. Charlotte, North Carolina-based Bank of America acquired Countrywide in 2008.
New York Attorney General Eric Schneiderman last week asked the New York state judge overseeing the case to reject the settlement, saying it was unfair to investors. Bank of New York Mellon Corp. (BK), the trustee for the mortgage-securitization trusts covered by the settlement, violated New York law, Schneiderman said.
Delaware investors in the mortgage bonds would be bound by the settlement and may not know about it, Biden’s office said in a court filing.
“The Delaware Department of Justice, based upon the review of the extremely limited universe of available facts concerning the proposed settlement, has significant concerns that the proposed settlement does not adequately remedy the harm suffered by beneficiaries of the covered trusts,” the attorney general’s office said.
Bank of New York, which reached the agreement on behalf of investors, may have violated the Delaware securities act and the state’s deceptive trade practices act, according to Biden.
There is also evidence that the bank negotiated under a conflict of interest, Biden’s office said. It said its investigation of Bank of New York is in preliminary stages.
“We are confident that we have fulfilled in all respects our responsibilities as trustee,” Kevin Heine, a Bank of New York spokesman, said in a statement. “We believe the proposed settlement is reasonable and in the best interests of the trusts.”
Lawrence Grayson, a Bank of America spokesman, didn’t immediately respond to an e-mail seeking comment.
The case is In the matter of Bank of New York Mellon, 651786/2011, New York State Supreme Court, New York County (Manhattan).
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