By Jonathan Stempel
NEW YORK Nov 4 Bank of America Corp has
won the dismissal of an unusual lawsuit in which shareholders
accused it of concealing a $10 billion fraud case brought by
American International Group Inc.
In a decision made public on Monday, U.S. District Judge
John Koeltl in Manhattan said the second-largest U.S. bank and
four officers, including Chief Executive Brian Moynihan, had not
been required to disclose in advance the purported imminence or
size of AIG's lawsuit.
AIG sued Bank of America on Aug. 8, 2011 over allegations
that the bank misrepresented the quality of more than $28
billion of mortgage-backed securities it 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, which was also the first session after
Standard & Poor's took away the United States' triple-A credit
rating. U.S. stock indexes fell 5.5 percent to 6.9 percent that
Shareholders led by Camcorp Interests Ltd, a Houston-based
investment firm, contended that Moynihan and other officials
knew in February 2011, six months before AIG sued, of the
insurer's claims and should have revealed them at the time.
But in a 50-page decision, the judge said details about the
lawsuit were not materially different from what the bank had
previously disclosed about its mortgage exposures.
He also said the bank made no incomplete or inaccurate
statements, and had no duty to disclose what Camcorp wanted.
"The alleged omissions did not mislead investors because
information about BoA's disclosure to MBS litigation generally,
and AIG's claim in particular, was in the public domain," Koeltl
wrote in a decision dated Nov. 1. "The overwhelming disclosure
concerning BofA's broad exposure to MBS litigation renders the
alleged omissions immaterial to a reasonable investor."
Jason Zweig, a partner at Hagens Berman Sobol Shapiro
representing the plaintiffs, did not immediately respond to
requests for comment.
Bank of America spokesman Lawrence Grayson said: "We are
pleased with court's decision."
AIG is still pursuing its lawsuit as it tries to recover
from activities that it said led to its near collapse in 2008,
resulting in $182.3 billion of federal bailouts.
Analysts have said Bank of America has spent more than $40
billion on litigation and other mortgage expenses since buying
Countrywide in July 2008 and Merrill six months later.
Last week, the bank said staff of a U.S. Attorney's office
plans to recommend that the U.S. Department of Justice sue the
bank over the packaging and sale of mortgage securities.
It also boosted its estimate of potential losses from legal
and regulatory matters, above existing reserves, to $5.1 billion
from $2.8 billion three months earlier.
The case is In re: Bank of America AIG Disclosure Securities
Litigation, U.S. District Court, Southern District of New York,