Shareholders take aim at Bank of America executives
Bank of America (BAC) shareholders are suing the bank's 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, according to court records. The shareholder suit, which was filed in a New York state court this week, relates to actions that occurred between Jan. 20 and Oct. 19, 2010. The shareholder lawsuit alleges investors witnessed a dramatic decline in the bank's stock value after BofA hid billions of dollars of debt through a process called "dollar rolling." In addition, the plaintiffs claim BofA misrepresented its financial health by failing to properly record "many of its mortgages when originated or acquired" from Countrywide, the suit asserts. Bank of America said it had no comment when asked about the case Tuesday afternoon. The suit also claims the bank's failure to properly record mortgages led to problems with the handling of troubled loans, which ultimately resulted in a failure to maintain internal controls over foreclosure processing. In addition, the shareholder suit says BofA did not "have adequate personnel to process the large numbers of foreclosed loans in its portfolio." The hidden debt situation and a general lack of awareness about the foreclosure debacles led to a situation where BofA stock traded artificially at $19.48 per share on April 15, 2010, the lawsuit contends. The plaintiff said on Oct 13, "the attorneys general of 50 states, led by the State of Iowa, announced a probe into United States banks regarding loan underwriting guidelines and credit losses." They also began investigating eviction procedures for delinquent borrowers. Once that news broke, BofA stock fell to $12.60 per share, the suit says. Not long after, BofA reported a net loss of $7.3 billion in the third quarter, pushing its stock even lower to $11.80 per share. The plaintiffs' contend BofA stock lost nearly 42% of its value. The investor group names BofA directors and executives as defendants, saying they "owed to BofA and its shareholders the fiduciary duty to exercise good faith and diligence in the administration of the affairs of the company and in the use and preservation of its property and assets, and the highest obligations of fair dealing." The defendants are accused of making false and misleading statements, gross mismanagement, abuse of control, and waste of corporate assets. The shareholders are asking for unspecified damages, court costs, expenses and attorneys fees. Write to Kerri Panchuk.