No liability for BofA for allegedly concealing $10 billion AIG case
NEW YORK (Reuters) - A federal appeals court said Bank of America Corp was not liable to shareholders for allegedly concealing a $10 billion fraud lawsuit by American International Group Inc, whose filing led to a 20-percent one-day plunge in the bank's stock price.
The 2nd U.S. Circuit Court of Appeals in New York on Monday found no showing that the bank, Chief Executive Brian Moynihan and other officials had intended to mislead shareholders and acted in a "highly unreasonable" manner by not disclosing the lawsuit before it was filed.
AIG sued Bank of America on August 8, 2011 over alleged losses on more than $28 billion of mortgage-backed securities that the insurer had bought from the Charlotte, North Carolina-based bank and its Countrywide and Merrill Lynch units.
Bank of America shares fell 20.3 percent on the day the lawsuit was filed. Major U.S. stock indexes fell more than 5 percent that day, the first trading session after Standard & Poor's took away the United States' triple-A credit rating.
Camcorp Interests Ltd, a Houston-based investment firm, claimed that the bank knew of AIG's claims as early as February 2011 and should have revealed them at that time.
But the 2nd Circuit said "the much more compelling conclusion" is that the bank found no disclosure was necessary in light of "information already in the marketplace, the aggregate disclosure of (Bank of America's) findings, and the lack of any definitive regulatory requirement requiring the disclosure of a possible lawsuit of indeterminate amount."
Monday's decision upheld a November 2013 ruling by U.S. District Judge John Koeltl in Manhattan.
Jason Zweig, a partner at Hagens Berman Sobol Shapiro representing Camcorp, declined to comment. The Alaska Electrical Pension Fund and the Northern Ireland Local Government Officers' Superannuation Committee supported the appeal.
Bank of America spokesman Lawrence Grayson said the bank was pleased with the decision.
AIG filed the lawsuit as part of its effort to recoup losses that led to its near-collapse in 2008, as well as $182.3 billion of federal bailouts.
The case is In re: Bank of America AIG Disclosure Securities Litigation, 2nd U.S. Circuit Court of Appeals, No. 13-4422.
(Editing by Noeleen Walder and Bernadette Baum)