A final judgment against Bank of America in a mortgage-bond lawsuit by the Securities and Exchange Commission was signed by a federal judge, helping clear the way for the lender to complete a $16.7 billion global settlement of claims it misled investors about risk.
The judgment signed yesterday by U.S. District Judge Max O. Cogburn Jr. in Charlotte, North Carolina, bars Bank of America from using deceit or fraud to sell securities. The lender agreed to the terms “without admitting or denying the allegations of the complaint.”
The SEC case and a parallel lawsuit by the Justice Department, now settled, were part of a U.S. bid to punish companies for actions the government says helped trigger the financial crisis. Bank of America struck a broad settlement in August with the Justice Department, state attorneys general and other regulators over claims that it sold souring mortgage securities without disclosing all the risks to investors.
The judgment calls for Bank of America to disgorge $109.2 million in profit, $6.62 million in interest and a civil penalty of $109.2 million, according to the filing.
Most of the alleged wrongdoing involved Merrill Lynch & Co. and Countrywide Financial Corp., companies Bank of America bought.
In the North Carolina case, the Justice Department said the lender portrayed its bonds as being backed by prime loans vetted by its staff, even though most were riskier wholesale mortgages originated by outside brokers. Some were “PaperSaver” loans that didn't require proof of borrowers' income, the U.S. said.
Lawrence Grayson, a spokesman for the Charlotte-based bank, declined to comment on the judgment.
In a New York case, Bank of America was found liable by a federal jury last year over claims that Countrywide defrauded Fannie Mae and Freddie Mac by selling them billions of dollars in bad mortgages.
The case is Securities and Exchange Commission v. Bank of America NA, 3:13-cv-447, U.S. District Court for the Western District of North Carolina (Charlotte).