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US government sues Bank of America twice for fraud

North Carolina residents may be aware that the United States Department of Justice and the Securities and Exchange Commission have sued Bank of America Corporation and certain subsidiaries and affiliates for civil fraud. The bank allegedly failed to disclose risks and consequently misled investors in sales of $855 million of mortgage-secured bonds in 2008. The government plaintiffs filed their separate complaints in the federal courthouse in Charlotte, where Bank of America maintains its headquarters.

The complaints accuse the bank of misleading investors about the risks of the mortgages tied to the securities. The government says that the bank should have disclosed to investors the fact that unaffiliated brokers wrote more than 70 percent of the mortgages, making them more likely to default than mortgages written by brokers affiliated with the bank.

The Justice Department complaint alleges that more than 22 percent of the mortgage collateral for the bonds was to purportedly self-employed borrowers and, of those, nearly 70 percent was to borrowers who claimed unverified income or assets. The SEC complaint does not allege intentional fraud. The agency sued under securities laws that require proof of only negligence. The Justice Department alleges knowing and willful fraudulent misrepresentations. The Justice Department's complaint says defrauded investors include the Federal Home Loan Bank of San Francisco. Total investor losses are over $100 million, prosecutors say.

Many business owners encounter cases of alleged fraud or other misconduct that may lead them to business litigation. In these cases, a business and commercial lawyer may be a great resource for those who are involved in contract disputes or other corporate disputes.

Source: Office of Public Affairs, United States Department of Justice, "Department of Justice Sues Bank of America for Defrauding Investors in Connection with Sale of Over $850 Million of Residential Mortgage-Backed Securities," Aug. 6, 2013.

Source: Yahoo! News, "US sues BofA over mortgage bond sale", August 06, 2013

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