Bank of America (BAC) asked a federal court to dismiss a lawsuit filed against the banking giant by investors who claim BofA failed to disclose litigation risks stemming from AIG‘s (AIG) purchase of mortgage-backed securities prior to the subprime meltdown.
Investors in the suit allege BofA — which acquired mortgage exposures tied to Countrywide and Merrill Lynch — failed to disclose to its shareholders the possibility that AIG would file a major lawsuit over mortgage-backed securities sold to the insurer by firms now linked to Bank of America.
AIG filed the suit on Aug. 8.
In it, BofA shareholders claim BofA misled its investors by not disclosing that the bank owes AIG as much as $10 billion.
BofA is pushing back against the shareholder suit, claiming in court filings that public information was already available on the mortgage litigation risks facing BofA.
“The securities filings of the major issuers of MBS, including BofA, Countrywide, and Merrill Lynch, had made the volume of MBS they had issued a matter of public record,” BofA noted in its motion to dismiss with the U.S. District Court, Southern District of New York.
“As a result, the universe of MBS that might result in potential exposure for BofA was already in the public domain prior to the class period.”
Bank of America also noted in its motion to dismiss that news agencies, including The New York Times, published articles as far back as April on BofA’s exposure to potential litigation from AIG through its acquisitions of Countrywide and Merrill Lynch.