DOJ sues Bank of America for fraud relating to financial crisis News
DOJ sues Bank of America for fraud relating to financial crisis
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[JURIST] The US Department of Justice (DOJ) [official website] on Tuesday filed suit [complaint, PDF] against Bank of America (BOA) [corporate website] in the US District Court for the Western District of North Carolina [official website], claiming the corporation misled investors about securitized loans worth more than $850 million. The complaint alleges that BOA deceived investors regarding the level of risk [Bloomberg report] associated with their products—specifically, the mortgage loans supporting the residential mortgage-backed securities. US Attorney Anne Tompkins elaborated on the DOJ’s position, stating [press release]:

Bank of America’s reckless and fraudulent origination and securitization practices in the lead-up to the financial crisis caused significant losses to investors. Now, Bank of America will have to face the consequences of its actions. We have made a commitment to the American people to hold financial institutions accountable for practices that violated the law and wreaked havoc on the financial system.

The DOJ named the Federal Home Loan Bank of San Francisco and Wachovia Bank as two of the five institutional investors defrauded by BOA [The Street report].

BOA has faced numerous legal challenges stemming from the financial crisis of 2007-08 [JURIST news archive]. In January BOA reached a $10 billion settlement [JURIST report] with Fannie Mae over faulty lending practices. Last October US Attorney Preet Bharara [official profile] filed a $1 billion civil lawsuit against BOA [JURIST report] in the US District Court for the Southern District of New York (SDNY) [official website], with similar claims that BOA subsidiary Countrywide Financial committed fraud in originating residential mortgages. In September BOA settled [JURIST report] a $2.43 billion class action lawsuit with investors over their $18.5 billion acquisition of Merrill Lynch. In July 2012 BOA agreed to pay $375 million [JURIST report] in a settlement with bond insurer Syncora Guarantee [corporate website] over claims that Syncora was misled into insuring toxic mortgage-backed securities of Countrywide Financial. Also that month a federal judge rejected [JURIST report] a motion by BOA to dismiss a shareholder lawsuit alleging BOA’s purposeful concealment of the bank’s exposure to billions of dollars in loan repurchase claims and its problematic reliance on an electronic loan registry. In December 2011 BOA reached a $315 million settlement of claims brought by investors alleging they were misled with respect to mortgage-backed investments, and a $335 million settlement [JURIST reports] with the DOJ, relating to discriminatory lending practices.