BofA sued by shareholder over $10 billion AIG loss

BofA sued by shareholder over $10 billion AIG loss

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NEW YORK (Global Markets) - A Bank of America Corp (BAC.N) shareholder sued the bank on Friday for what he said was a failure to disclose it potentially owes more than $10 billion to American International Group Inc (AIG.N) in connection with mortgage-backed securities.

The lawsuit, filed in U.S. District Court in Manhattan, seeks class action status on behalf of purchasers of Bank of America stock between February 25 and August 5 this year.

AIG, which was bailed out by the government in the 2008 financial crisis, suffered losses of more than $10 billion from the securities, known as RMBS, between 2005 and 2007. The losses occurred after Bank of America and two companies it bought -- Countrywide Financial Corp and Merrill Lynch -- and subsidiaries sold AIG more than $28 billion in RMBS.

"Throughout the class period, defendants repeatedly informed investors about the claims of other entities for RMBS losses but not about the massive losses suffered by AIG," the lawsuit said.

Lawrence Grayson, a spokesman for Charlotte, North Carolina-based Bank of America, said he had not seen the lawsuit and declined to comment.

The court document said the shareholder losses occurred on August 8 as Bank of America's stock dropped more than 20 percent to $6.51 per share from $8.17 per share after AIG sued the bank in New York state court seeking to recover the RMBS losses.

"This decrease was a result of the artificial inflation caused by the defendants' misleading statements coming out of the price," Friday's lawsuit said.

In a footnote, the court document adds that the plaintiff, shareholder David Lawrence, "asserts only that BofA should have disclosed AIG's losses and potential claims to investors and takes no position on whether those claims will ultimately be found to have merit."

Lawrence asks the court to declare the lawsuit a class action under anti-fraud provisions of federal securities law and seeks unspecified damages for all members of the class.

The case is David Lawrence et al v Bank of America Corp, U.S. District Court for the Southern District of New York, No. 11-6678.

(Editing by Steve Orlofsky)

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JPMorgan, BofA sued over mortgage debt losses

JPMorgan, BofA sued over mortgage debt losses

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(Global Markets) - JPMorgan Chase & Co and Bank of America Corp were hit with new lawsuits by investors claiming losses on $4.5 billion of soured mortgage debt, adding to litigation targeting the two largest U.S. banks.

The plaintiff Sealink Funding Ltd said it lost money after buying nearly $2.4 billion of residential mortgage-backed securities (RMBS) from JPMorgan and $1.6 billion from Bank of America from 2005 to 2007, relying on offering materials that were misleading about the quality of the underlying loans.

According to court papers, Sealink is an Irish entity that oversees risky RMBS that contributed to the near collapse of Germany's Landesbank Sachsen AG.

Another plaintiff, Germany's Landesbank Baden-Wurttemberg, raised similar claims in a separate lawsuit against JPMorgan over $500 million of RMBS that it said it bought.

The lawsuits accuse the banks of packaging large amounts of high-risk mortgages by such issuers as Countrywide Financial now owned by Bank of America, and Bear Stearns and Washington Mutual, now owned by JPMorgan, in pursuit of higher profit.

"This misconduct has resulted in astounding rates of default on the loans underlying the defendants' RMBS and massive downgrades of the (investors') certificates, the vast majority of which are now considered 'junk,'" the lawsuits said.

The investors are seeking compensatory and punitive damages in the lawsuits, all filed Thursday in the New York State Supreme Court in Manhattan.

Bank of America spokesman Lawrence Grayson said the bank will defend against its lawsuit by Sealink, which "appears to be another sophisticated investor looking for someone to blame" for losses caused by a downturn in the economy.

JPMorgan spokeswoman Jennifer Zuccarelli declined to comment. Bernstein Litowitz Bernstein & Grossmann, which represents Sealink and Landesbank Baden-Wurttemberg, did not respond to a request for comment.

In a separate lawsuit filed on Thursday in the same court, Britain's Barclays Plc was sued by Germany's HSH Nordbank AG, which said it lost $40 million after being misled into buying risky RMBS.

Barclays spokeswoman Kristin Friel declined to comment.

Banks face many lawsuits by mortgage securities investors seeking to hold them responsible for losses on debt that once seemed safe but turned toxic once the housing and credit crises began more than four years ago.

Bank of America is seeking court approval of an $8.5 billion global settlement covering investors in mortgage pools with $174 billion of unpaid Countrywide principal balances.

That bank and JPMorgan are also among lenders negotiating with regulators including all 50 state attorneys general on a multibillion-dollar accord addressing foreclosure abuses.

The cases are all in the New York State Supreme Court, New York County. They are HSH Nordbank AG et al v. Barclays Bank Plc et al, No. 652678/2011; Sealink Funding Ltd v. Countrywide Financial Corp et al, No. 652679/2011; Landesbank Baden-Wurrtemberg et al v. Bear Stearns & Co et al, No. 652680/2011; and Sealink Funding Ltd v. Bear Stearns & Co et al, No. 652681/2011.

(Reporting by Jonathan Stempel in New York, editing by Gerald E. McCormick, Matthew Lewis, Gary Hill)

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