Bank of America Seeks to Block CEO Deposition in MBIA Suit

Bank of America Corp. asked a New York state judge to block the deposition of Chief Executive Officer Brian T. Moynihan in a fraud suit brought by MBIA Inc. (MBI)

The nation’s second-biggest lender, based in Charlotte, North Carolina, asked New York state Supreme Court Justice Eileen Bransten in Manhattan to issue a protective order against the deposition, according to a court filing yesterday.

“We have moved for a protective order because a chief executive officer of a major corporation may only be deposed when he or she has unique information that is not available through other means.” Bank of America spokesman Lawrence Grayson said today in a statement. “The discovery process remains fully available to MBIA, including through the numerous current and former executives that MBIA will be deposing.”

The bank asked Bransten to order MBIA to explain why a protective order against the deposition shouldn’t be issued. The motion was filed under seal in accordance with the parties’ agreement regarding the production and exchange of information that includes internal company documents, Grayson said.

2008 Lawsuit

MBIA, which sued Bank of America’s Countrywide Financial unit in 2008, guarantees payments to investors that bought securities backed by pools of the lender’s loans. The insurer says the loans were riskier than Countrywide promised, and as they defaulted, the Armonk, New York-based company was forced to make payments.

Bank of America bought Calabasas, California-based Countrywide in July 2008 as the lender faced payment defaults and foreclosures tied to subprime mortgages. MBIA sued Countrywide three months later.

Moynihan, 52, has been chief executive since taking over for Kenneth Lewis in 2010.

Kevin Brown, an MBIA spokesman, declined to comment on the motion in an e-mail. Manisha M. Sheth, an attorney with Quinn Emanuel Urquhart & Sullivan LLP who is representing MBIA, didn’t immediately return a telephone message left at her office.

William Sushon, an attorney at O’Melveny & Myers LLP who filed the bank’s proposed protective order, didn’t immediately respond to messages seeking further comment.

‘Widespread’ Fraud

Lawyers for MBIA in a letter yesterday asked Bransten to let them file a motion to compel Countrywide to produce “several categories” of documents, many of which relate to “recently-uncovered evidence of widespread mortgage-origination fraud at Countrywide.”

“The lengths to which Countrywide will go to conceal its shoddy and sometimes fraudulent origination practices are made obvious by Countrywide’s grudging and belated production two weeks ago -- after the end of discovery and the relevant dispositions -- of an incomplete set of records concerning the loans in the securitizations at issue from Countrywide’s fraud- tracking database, FACTS, which MBIA had not previously known to exist,” Jonathan B. Oblak, a lawyer for MBIA, said in the letter.

Countrywide has refused to produce documents “relating to claims of fraud in mortgage origination,” including some related to a hotline intended to receive complaints about illegal activity by employees and some related to the firings of two whistleblowers, Oblak said in the letter.

‘Promptly and Voluntarily’

Lawyers for Countrywide said today in a letter to Bransten that the company “promptly and voluntarily” produced all records contained in the FACTS database concerning loans in the securitizations that were insured by MBIA.

“MBIA’s motion is a patent attempt to renege on the parties’ earlier agreements and part of MBIA’s continuing strategy to pre-try this case before the court and in the press based on nothing more than hyperbolic rhetoric and falsehoods,” Sarah Heaton Concannon, a lawyer for Countrywide, said in today’s letter.

Bransten ruled Jan. 3 that MBIA need only show Countrywide made misrepresentations about the loans, instead of also establishing they caused the losses the bond insurer is seeking to recover. Countrywide has appealed that ruling.

The case is MBIA Insurance Corp. v. Countrywide Home Loans Inc., 602825-2008, New York State Supreme Court (Manhattan).

To contact the reporters on this story: Chris Dolmetsch in New York at cdolmetsch@bloomberg.net; David McLaughlin in New York at dmclaughlin9@bloomberg.net

To contact the editors responsible for this story: Michael Hytha at mhytha@bloomberg.net; John Pickering at jpickering@bloomberg.net

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