BofA unit wins $146 million after currency swap trial

Fri Apr 13, 2012 12:14pm EDT

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(Reuters) - A federal judge has awarded a Bank of America Corp (BAC.N) unit $146.1 million in a breach-of-contract case against the Brazilian sugar and ethanol company Usinas Itamarati SA, over losses stemming from the 2008 global financial crisis.

U.S. District Judge Richard Sullivan said the bank's Merrill Lynch Capital Services Inc unit deserved the entire amount it sought because Itamarati had guaranteed obligations of its UISA Finance affiliate under a series of derivative transactions.

Sullivan presided last June in a five-day bench trial in Manhattan over the dispute, and issued his decision on Tuesday.

The case arose out of a November 2007 swap in which UISA accepted exposure to a strengthening U.S. dollar relative to the Brazilian real.

Sullivan said a successful bet could have saved UISA millions of dollars. But losses began to grow in September 2008 and Itamarati failed to provide Merrill with enough acceptable collateral, causing the swap to be terminated on October 28, 2008. Merrill sued in March 2009.

"Defendants have labored hard and long to extricate themselves from that bet," Sullivan wrote. "Those labors are unavailing and ... defendants will be required to live up to the obligations they knowingly accepted."

Sullivan rejected Itamarati's argument that its guarantee was unenforceable because the people who signed the paperwork lacked authority to do so.

He was particularly critical of one trial witness, Ana Claudia De Moraes Tamer, the sole shareholder of the privately-held company.

The judge said her "shifting and contradictory deposition testimony, trial affidavit, and trial testimony" made her "an utterly non-credible witness not worthy of belief."

Bank of America had no immediate comment on Friday. A lawyer for Itamarati did not immediately respond on Friday to a request for comment.

Itamarati is based in Nova Olimpia, Brazil, while Bank of America is based in Charlotte, North Carolina.

The case is Merrill Lynch Capital Services Inc v. UISA Finance et al, U.S. District Court, Southern District of New York, No. 09-02324.

(Reporting by Jonathan Stempel in New York; Editing by Tim Dobbyn)

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