While few financial firms are being spared in a wave of lawsuits being filed by investors, the company that seems to be most frequently named as a defendant is Bank of America Corp. Several pending cases against an array of firms including BofA involve alleged Ponzi schemes.
A putative class action was commenced in U.S. District Court for the Southern District of New York against BofA, Robbins Geller Rudman & Dowd LLP announced last week. The class includes investors who purchased the company's common stock between Feb. 25 and Aug. 5.
The Charlotte, N.C.-based firm allegedly deceived investors by not disclosing that it potentially owes American International Group. Inc. more than $10 billion, according to the news release. BofA and subsidiaries Merrill Lynch & Co. and Countrywide Financial Corp. reportedly sold AIG more than $28 billion in residential mortgage-backed securities that ended up costing AIG more than $10 billion.
AIG, according to Robbins Geller's statement, filed a lawsuit against BofA on Aug. 8 in New York state court.
In June, investors and borrowers who lost millions of dollars in an alleged Ponzi scheme operated by Juan Rangel filed a class action in Los Angeles Superior Court, against BofA, a news release from Capretz & Associates said. Rangel allegedly operated investment, mortgage and foreclosure rescue schemes that netted him around $30 million.
The mostly Spanish-speaking Latino plaintiffs claim that BofA employees and managers were aware, or at least should have been aware, of the criminal activity. The statement noted that BofA branch manager Dony Gonzalez has already pled guilty to accepting bribes from Rangel, who himself pleaded guilty in October 2010.
BofA filed a request for dismissal in a lawsuit filed by Joel Sher, the bankruptcy trustee for Thornburg Mortgage, because the trustee failed to state a claim, Bloomberg reported. The case was filed in U.S. Bankruptcy Court in Baltimore.
The Second District California Court of Appeals ruled that 248 borrowers who sued Countrywide cannot continue pursuing a claim for fraudulent concealment, according to Courthouse News. The court wrote that the generalized decline in home values impacted all homeowners.
The PNC Financial Services Group Inc. settled for $168 million a lawsuit against subsidiary National City Corp. in August, according to a filing with the Securities and Exchange Commission. The settlement, filed in U.S. District Court for the Northern District of Ohio, is conditioned on, among other things, final documentation, notice to the class and court approval.
James O'Leary, the former chief financial officer of Beazer Home USA, agreed to a settlement with the SEC, an Aug. 30 news release indicated. O'Leary agreed to reimburse Beazer more than $1.4 million -- the amount he received in bonus compensation and stock-sale profits after Beazer filed fraudulent financial statements in fiscal 2006.
The settlement with O'Leary, who is not personally charged with misconduct, is subject to court approval.
The Office of the Comptroller of the Currency closed Silverton Bank, N.A., in May 2009 and appointed the Federal Deposit Insurance Corp. as receiver. The wholesale financial institution had $4.1 billion in assets at the time of its failure, and the FDIC projected related losses for the Atlanta-based institution at $1.3 billion.
On Aug. 22, the FDIC filed a $71 million lawsuit in U.S. District Court for the Northern District of Georgia against 17 former executives and members of the board of Silverton Bank, including the former superintendent of the Alabama Banking Department, The Fairhope Courier reported. The defendants allegedly hosted lavish retreats, spent $35 million on a new headquarters and approved risky loans as the real estate market tanked in 2007 and 2008.
First National Bank of Arizona was acquired in June 2008 by First National Bank of Nevada, which failed on July 25, 2008, according to a Bloomberg report. The FDIC filed a lawsuit in U.S. District Court for the District of Arizona against former First National Bank of Arizona chief executive officer Gary A. Dorris and former director Philip A. Lamb alleging that the duo sacrificed safety and promoted risky nontraditional mortgages that ultimately led to the bank's failure.
Deloitte & Touche LLP was sued in a Florida state court by Neil F. Luria, the bankruptcy trustee for Taylor Bean & Whitaker Mortgage Corp., and by Taylor Bean subsidiary Ocala Funding in a pair of lawsuits seeking $7.6 billion, the Wall Street Journal reported. The auditing firm is accused of ignoring red flags and not understanding the failed lender's financial reports.
Western Corporate Federal Credit Union was placed into conservatorship in 2009 by the National Credit Union Administration. The corporate credit union had $23 billion in assets and around 1,100 retail credit union members when it collapsed.
The NCUA took over a lawsuit against 25 current and former employees and officials of WesCorp in December 2009, filing an amended complaint in Los Angeles Superior Court. The complaint alleged negligence and breach of fiduciary duties by the defendants with WesCorp's investments in residential mortgage-backed securities and collateralized-debt obligations.
But the NCUA lost its lawsuit according to Banking Law. The court ruled that the defendants weren't liable for acts alleged to be negligent because the actions of the directors were protected by the so-called business judgment rule.
Hard-money lender Financial Resources Mortgage Inc. operated as a classic Ponzi scheme, according to a report released in April from New Hampshire Secretary of State William Gardner. Investments ranged from $200,000 to $2 million and totaled $80 million.
But the scheme began to unravel in 2007 as subprime lending evaporated, and the company eventually filed bankruptcy in November 2009. By January 2011, the company's founder and chief, Scott Farah, was sentenced in U.S. District Court for the District of New Hampshire to 15 years in prison.
Two months ago, Al and Susan McIlvene -- who invested $850,000 in Financial Resources -- settled a claim with the bankruptcy trustee, Steven Notinger, for $155,000, the Portsmouth Herald reported. The couple decided to settle after observing another investor in the case, Melanie Migliaccio, spend $60,000 on attorneys fees without little certainty that she will see an increase in her recovery.
A lawsuit filed in U.S. District Court for the Southern District of New York on behalf of lead plaintiff Teachers' Retirement System of Oklahoma against MBIA Inc. was settled for $68 million, according to a Bloomberg story. The bond insurer was accused of hiding its MBS and CDO exposure.
Patricia Arreola, et al, Plaintiffs, vs. Bank of America, National Association, a National Banking Association; Pablo Araque, an individual; and Does 1 through 100, inclusive; Defendants.
Case No. BC464530, June 30, 2011 (Los Angeles Superior Court, Central Civil West).
In re National City Corporation Securities, Derivative & ERISA Litigation.
MDL No. 2003, Case No: 1:08-nc-70004 (U.S. District Court for the Northern District of Ohio).
Securities and Exchange Commission, Plaintiff, v. James O'Leary, CPA, Defendant.
Case No. 1:11-cv-2901, Aug. 30, 2011 (U.S. District Court for the Northern District of Georgia).
Federal Deposit Insurance Corp. v. Dorris.
Case No. 2:11-cv-01652 (U.S. District Court for the District of Arizona).
In Re MBIA Inc. Securities Litigation.
Case No. 08-264 (U.S. District Court for the Southern District of New York).