Anchorage retirement fund sues Bank of America over subprime securities
The acquisition of subprime lender Countrywide Financial Corp. continues to plague Bank of America (BAC) with an onslaught of securities litigation. An Alaska retirement fund fired off another round this week, claiming in a suit that its members sustained losses on BofA investments due to the bank's exposure to subprime loans. The latest plaintiff — the Anchorage Police & Fire Retirement System — filed its securities complaint in the United States District Court of the Southern District of New York on Wednesday. BofA had no comment on the lawsuit. The system accuses the Charlotte-based bank of numerous securities violations, alleging the bank and certain officers "concealed material information and made false and misleading statements relating to the company's exposure to several forms of risk," the complaint said. Those various forms of risk included the bank's exposure to faulty mortgages originated by Countrywide, BofA's knowledge that it had loans in the system it could not foreclose on, allegations of widespread mortgage servicing issues and the bank's alleged 'dollar rolling' practice through which it allegedly 'reduced reported leverage ratios while taking on more risk than it disclosed,' " the plaintiffs said. The Anchorage Police & Fire Retirement System claims BofA made misleading statements about its financial situation and "repeatedly assured investors that Bank of America's exposure to repurchase demands was manageable and the company had adequately reserved for this exposure." However, the retirement fund said shareholders saw BofA's stock drop 54 cents per share in October of 2010 after it was revealed investors holding $47 billion in Countrywide RMBS sent a buyback demand letter to BofA asking it to reacquire the securities. In addition, the company reported a net loss of $7.3 billion for the third quarter of 2010. The retirement fund alleges BofA hid its financial risk level until The Wall Street Journal reported that BofA "had masked their risk levels for the previous five quarters by temporarily lowering their debt just before they reported their results," the lawsuit claims. The Anchorage Police & Fire Retirement System suit is one of two investor lawsuits filed against BofA this week. Earlier in the week, shareholders filed a different suit against BofA CEO Brian Moynihan, board of directors and other executives, claiming the leaders failed to disclose billions of dollars in hidden debt and improperly recorded mortgages. Write to Kerri Panchuk.