Bank of America sued over fraud allegations

July 29, 2011|By Hugh Son, Bloomberg News

NEW YORK - Bank of America Corp., the biggest US 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 yesterday 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.

The investors hope to “maximize’’ their returns in a jury trial, their attorney, Blair Nicholas, a partner at Bernstein Litowitz Berger & Grossmann LLP, said in an e-mail.

For Bank of America chief executive 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.

Bill Halldin, a spokesman for Charlotte, N.C.- based Bank of America, had no immediate comment on the lawsuit.

In February, US 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.