By Jonathan Stempel
NEW YORK, Aug 29 (Reuters) - Bank of America Corp is urging
a federal court to throw out an unusual lawsuit by its
shareholders accusing it of concealing a $10 billion fraud case
brought by American International Group Inc.
The bank argued in papers filed late Tuesday in Manhattan
federal court that shareholders should have known the insurer
might sue, based on published reports several months earlier.
Bank of America also contended that shareholders may not
have been harmed by the insurer's lawsuit.
AIG sued Bank of America on Aug. 8, 2011, alleging
misrepresentations about the quality of more than $28 billion of
mortgage-backed securities it bought from the bank and its
Countrywide and Merrill Lynch units. Bank of America shares fell
20.3 percent on the day the case was filed.
Shareholders led by Camcorp Interests Ltd, a Houston-based
investment firm, sued the bank last September, arguing that
Chief Executive Brian Moynihan and other officials had known in
February 2011 of AIG's potential claims and should have revealed
this "extremely large and material" threat at the time.
In its Tuesday court filing, the second-largest U.S. bank
said reports published in the New York Times and elsewhere
noted the possibility of AIG litigation as early as April 2011.
The Charlotte, North Carolina-based bank also said it had
long disclosed its exposure to significant mortgage securities
litigation, "a favorite subject" of media and analysts.
"The extensiveness of the litigation risk disclosures that B
of A did make, the lack of any obvious duty to disclose more,
and the fact that it was already widely reported that AIG was
considering suing B of A -- all undermine any inference of
recklessness," the bank said in the filing.
Bank of America also noted that the broader stock market,
not just its own shares, plunged on the day AIG filed its
lawsuit.
That day was the first trading session after Standard &
Poor's took away the United States' triple-A credit rating.
Major U.S. stock indexes fell 5.5 percent to 6.9 percent, and
while Bank of America was the S&P 500's biggest percentage
loser, prices of many rivals fell by double-digit percentages.
The complaint "does not so much as mention" the U.S. credit
rating downgrade, a "cataclysmic marketwide event" that could
just as easily have been responsible for the shareholder losses,
the bank said in the filing.
Steve Berman, a partner at Hagens Berman Sobol Shapiro
representing the plaintiffs, said on Wednesday: "We are
confident we will defeat the bank's motion to dismiss."
AIG's $10 billion lawsuit is still pending. In its most
recent quarterly report, Bank of America estimated that it might
be forced to pay out as much as $4.1 billion more for litigation
and regulatory matters than the unspecified sum it has set
aside.
The case is In re: Bank of America AIG Disclosure Securities
Litigation, U.S. District Court, Southern District of New York,
No. 11-06678.
Follow us on Twitter @ReutersLegal | Like us on Facebook