Bank of America

Ex-Bank of America CFO to Pay $7.5M to Settle with NY Over Merrill Lynch Acquisition Allegations

Published on: April 26, 2014 | by Shepherd Smith Edwards & Kantas, LLP

Joe Price, the ex-chief finance officer of Bank of America Corp. (BAC) has consented to pay $7.5 million to settle allegations by the state of New York that the bank and its ex-executives misled investors over losses that were happening at Merrill Lynch even as shareholders were getting ready to approve its acquisition by the bank.

Bank of America’s decision to purchase Merrill as Lehman Brothers Holdings Inc. was collapsing was initially seen by many as a positive. However, after the deal was made public and Merrill’s problems soon became known, speculation over how much information was kept from those approving the deal mounted.

The state contended that Bank of America misled shareholders about Merrill’s losses to get the $18.5 billion deal approved. They then got the federal government to contribute bailout money from the Troubled Asset Relief Program to complete the sale. The bank has since become the subject of regulatory investigations and securities lawsuits over their actions. It even consented to pay $2.43 billion in 2012 to resolve a class action securities fraud case filed by investors over the Merrill acquisition. Settlements in total have to date surpassed $50 billion.

U.S. Wants Bank of America to Pay Over $13B Over Residential Mortgage-Backed Securities

Published on: April 24, 2014 | by Shepherd Smith Edwards & Kantas, LLP

Bloomberg is reporting that U.S. prosecutors want Bank of America Corp. (BAC) to settle state and federal investigations into the lender’s sale of home loan-backed bonds leading up to the 2008 financial crisis by paying over $13 billion. The bank is one of at least eight financial institutions that the Department of Justice and state attorneys general are investigating for misleading investors about the quality of the loans that were backing mortgages just as housing prices fell.

A lot of Bank of America’s loans came from its purchase of Countrywide Financial Corp., a subprime lender, and Merrill Lynch & Co., which packaged a lot of the loans into bonds.

If there ends up being no deal, the government could sue the bank.

Bank of America, Its Ex-CEO To Pay $25M to Settle Securities Case with NY Over Merrill Lynch Deal

Published on: March 31, 2014 | by Shepherd Smith Edwards & Kantas, LLP

Bank of America Corp. (BAC) and its ex-CEO Kenneth Lewis have consented to pay $25 million to settle the remaining big securities fraud case accusing them of misleading investors about the financial state of Merrill Lynch & Co. during the 2008 financial crisis. The New York securities case accuses the bank of deceiving shareholders by not disclosing Merrill’s increasing losses before the acquisition deal was closed or letting them know that the deal let Merrill give its officials billions of dollars in awards.

As part of the settlement, the bank will pay the state of New York $15 million and it will enhance its oversight. Lewis, meantime, has consented to pay $10 million and he cannot work at or serve as a director of any public company for three years.

Also named as a defendant in the securities lawsuit but who refused to settle is ex-Bank of America CFO Joe Price. NY Attorney General Eric Schneiderman intends to pursue a summary judgment against him, as well as ask a judge to reach a decision without a trial. Schneiderman reportedly wants Price permanently banned from serving as a director or working at a public company.

Bank of America Settles Mortgage Bond Claims with FHFA for $9.3B

Published on: March 29, 2014 | by Shepherd Smith Edwards & Kantas, LLP

Bank of America (BAC) will pay $9.3 billion to settle securities claims that it sold faulty mortgage bonds to Freddie Mac (FMCC) and Fannie Mae (FNMA). The deal, reached with the Federal Housing Finance Agency, includes $3.2 billion in securities that the bank will buy from the housing finance entities and a cash payment of $6.3 billion.

The mortgage bond settlement resolves securities lawsuits against the bank, Countrywide, and Merrill Lynch (MER). FHFA, which regulates both Freddie Mac and Fannie Mae, accused Bank of America of misrepresenting the quality of the loans behind residential mortgage-backed securities that the mortgage financing companies purchased between 2005 and 2007.

This is the 10th of 18 securities lawsuits reached by the FHFA over litigation involving around $200 billion in mortgage-backed securities. To date, it has gotten back over $10 billion over such claims.

Detroit, MI to Pay UBS and Bank America $85M Over Interest Swaps Settlement

Published on: March 4, 2014 | by Shepherd Smith Edwards & Kantas, LLP

The city of Detroit has agreed to pay Bank of America Corp.’s (BAC) Merrill Lynch (MER) and UBS AG (UBSN) $85 million as part of a settlement to end interest-rate swaps, which taxpayers have had to pay over $200 million for in the last four years. Now, US Bankruptcy Judge Steven Rhodes must decide whether to approve the deal.

The swaps involved are connected to pension obligation bonds that were issued in ’05 and ’06. They were supposed to protect the city from interest rates going up by making banks pay Detroit if the rates went above a certain level. Instead, the rates went down, and Detroit has owed payments each month.

Under the swaps deal, the city owed $288 million. The settlement reduces the amount by 70%, which should help, as Detroit had to file for protection last year over its $18 billion bankruptcy.

Ex-Bank of America Corp. Executive Enters Guilty Plea in Municipal Bond Rigging Scam

Published on: February 12, 2014 | by Shepherd Smith Edwards & Kantas, LLP

Phillip D. Murphy, an ex-Bank of America Corp. (BAC) executive that used to run the municipal derivatives desk there, has pleaded guilty to wire fraud and conspiracy charges in a muni bond rigging case accusing him of conspiring to bilk the US government and bond investors. In federal court, he admitted to manipulating the bidding process involving investment agreements having to do with municipal bond proceeds.

The illegal activity was self-reported by his former employer. Bank of America has been cooperating with prosecutors that have accused bankers of paying kickbacks to CDR Financial Products to fix bids on investment contracts purchased by local governments. The contracts were bought using money from bond sales.

According to the indictments, from 1998 to 2006, Murphy and CDR officials conspired to up the amount and profitability of investment deals and municipal finance contracts that went to Bank of America. Murphy purportedly won actions for certain contracts after other banks consented to purposely turn in losing bids.

Bank of America’s $8.5B Mortgage Bond Settlement Gets Court Approval

Published on: January 31, 2014 | by Shepherd Smith Edwards & Kantas, LLP

A judge has approved an $8.5B mortgage-bond settlement between Bank of America (BAC) and investors. The agreement should settle most of the bank’s liability from when it acquired Countrywide Financial Corp. while the financial crisis was happening and resolves contentions that the loans behind the bonds were not up to par in quality as promised. Included among the 22 investors in the mortgage-bond deal: Pacific Investment Management Co., BlackRock Inc. (BLK), and MetLife Inc. (MET.N). Under the agreement, investors can still go ahead with their loan-modification claims.

The trustee for over 500 residential mortgage-securitization trusts is Bank of New York Mellon Corp. (BK), which had turned in a petition seeking approval for the deal nearly three years ago for investors who had about $174 million of mortgage-backed securities from Countrywide. Now, Judge Barbara Kapnick of the New York State Supreme Court Justice has approved the mortgage-bond deal.

Kapnick believes that the trustee had, for the most part, acted in good faith and reasonably when determining the settlement and whether it was in investors’ best interests. However, she is allowing plaintiffs to continue with their claims related to loan-modification because, she says, Bank of New York Mellon Corp “abused its discretion” on the matter in that even though the trustee purportedly knew about the issue, it didn’t evaluate the possible claims. Also, the judge said that it makes sense for this one-time payment because it was evident that Bank of New York Mellon was worried Countrywide wouldn’t be able to pay a judgment in the future that came close to the $8.5 billion settlement.

Detroit, MI Can’t Pay $165M to UBS & Bank of America For Swaps Deal, Rules Judge

Published on: January 21, 2014 | by Shepherd Smith Edwards & Kantas, LLP

A bankruptcy judge says is refusing to grant the city of Detroit, MI permission to pay $165 million to Bank of America (BA) and UBS AG (UBS) to end an interest-rate swaps deal that taxpayers have been paying $202 million for since 2009. U.S. Bankruptcy Judge Steven Rhodes says the payment, in addition to a fee of over $4 million, is too costly for the beleaguered city.

Rhodes said he doesn’t believe it is in the city’s best interests to make this deal. Detroit filed the biggest municipal bankruptcy in US history due to its $18 billion debt. Prior to seeking bankruptcy protection, the city had arrived at a deal to terminate the swaps contract that it had signed with Bank of America unit Merrill Lynch (MER), UBS, and SBS Financial Products Co. for $230 million.

According to their 2009 deal, the banks are entitled to seek control of Detroit’s casino taxes, which the city pledged as cash to UBS and Bank of America. Now, Detroit may have to submit an emergency motion asking the court to protect the cash so that the banks don’t take the funds.

Bank of America’s Countrywide to Pay $17.3M RMBS Settlement to Massachusetts

Published on: December 30, 2013 | by Shepherd Smith Edwards & Kantas, LLP

According to Massachusetts Attorney General Martha Coakley, Countrywide Securities Corp. (CFC) will pay $17 million to settle residential mortgage backed securities claims. The settlement includes $6 million to be paid to the Commonwealth and $11.3 million to investors with the Pension Reserves Investment Management Board. Countrywide is a Bank of America (BAC) unit.

Coakley’s office was the first in the US to start probing and pursuing Wall Street securitization firms for their involvement in the subprime mortgage crisis. Other RMBS settlements Massachusetts has reached include: $34M from JPMorgan Chase & Co. (JPM), $36M from Barclays Bank (ADR), $52 million from Royal Bank of Scotland (RBS), $102 million from Morgan Stanley (MS), and $60 million from Goldman Sachs. (GS).

Meantime, a federal judge is expected to rule soon on how much Bank of America will pay in a securities fraud verdict related to the faulty mortgages that Countrywide sold investors. A jury had found the bank and ex-Countrywide executive Rebecca Mairone liable for defrauding Freddie Mac and Fannie Mae via the sale of loans through that banking unit. The US government wants Bank of America to pay $863.6 million in damages. Mairone denies any wrongdoing.

Fannie Mae Sues UBS, Bank of America, Credit Suisse, JPMorgan Chase, Citigroup, & Deutsche Bank, & Others for $800M Over Libor

Published on: December 14, 2013 | by Shepherd Smith Edwards & Kantas, LLP

Fannie Mae is suing nine banks over their alleged collusion in manipulating interest rates involving the London Interbank Offered Rate. The defendants are Bank of America (BAC), JPMorgan Chase (JPM), Credit Suisse, UBS (UBS), Deutsche Bank (DB), Citigroup (C), Royal Bank of Scotland, Barclays, & Rabobank. The US government controlled-mortgage company wants over $800M in damages.

Regulators here and in Europe have been looking into claims that a lot of banks manipulated Libor and other rate benchmarks to up their profits or seem more financially fit than they actually were. In its securities fraud lawsuit, Fannie Mae contends that the defendants made representations and promises regarding Libor’s legitimacy that were “false” and that this caused the mortgage company to suffer losses in mortgages, swaps, mortgage securities, and other transactions. Fannie May believes that its losses in interest-rate swaps alone were about $332 million.

UBS, Barclays, Rabobank, and Royal Bank of Scotland have already paid over $3.6 billion in fines to settle with regulators and the US Department of Justice to settle similar allegations. The banks admitted that they lowballed their Libor quotes during the 2008 economic crisis so they would come off as more creditworthy and healthier. Individual traders and brokers have also been charged.