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BofA Suit Against FDIC on $1.7 Billion Loss Dismissed

Bank of America Corp.’s lawsuit against the Federal Deposit Insurance Corp. over $1.7 billion in investor losses was dismissed by a federal judge.

U.S. District Judge Barbara Rothstein in Washington threw out the case, saying there weren’t enough assets to make any payments on general creditor claims.

Bank of America’s claims, based on its role as trustee for Ocala Funding LLC, “have no value and must therefore be dismissed because no case or controversy exists,” Rothstein wrote in her decision yesterday.

The case stems from a mortgage-fraud scheme at failed lender Taylor, Bean & Whitaker Mortgage Corp. From 2002 through August 2009, Lee Farkas, while he was chairman of Taylor Bean, sold more than $1.5 billion in fake mortgage loans to Colonial Bank with the collusion of its employees and diverted more than $1.5 billion from Ocala Funding, a financing vehicle Taylor Bean controlled.

Farkas is serving a 30-year sentence after being convicted in April 2011 of 14 counts of conspiracy and bank, wire and securities fraud in what prosecutors said was a $3 billion scheme involving fake mortgage assets.

The judge also found that the court didn’t have jurisdiction “because the Colonial receivership will never have the assets necessary to satisfy a judgment” in favor of Charlotte, North Carolina-based Bank of America.

The case is Bank of America v. FDIC, 10-cv-01681, U.S. District Court, District of Columbia (Washington).

To contact the reporter on this story: Sara Forden in Washington at sforden@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net

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