BofA Sued Over Alleged Failure To Disclose Potential $10 Billion AIG Loss
NEW YORK (Grant McCool) - 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)
Copyright 2011 Thomson Reuters. Click for Restrictions.