A new ruling yesterday in the U.S. District Court for the Southern District of New York has commingled three mortgage lawsuits against Bank of America (BofA) into one big legal effort, with a Pennsylvania pension fund taking the lead.

In a June 20 filing, District Court Judge William Pauley listed as background that the plaintiffs allege the banking conglomerate partook in "two primary types of misconduct." He noted that the first touched on BofA engaging in a practice called "dollar rolling," where it transferred MBS "to another entity, with the understanding that BofA would repurchase them after it had issued its quarterly financial statement."

Also, Pauley listed that the second collective charge alleges that "BofA failed to maintain adequate controls in processing foreclosures."

The three cases include a joint filing by Sjunde AP-Fonden (AP7), a Swedish pension fund manager, the Arkansas Teachers Retirement System, and KBC Asset Management. The Pennsylvania Public School Employees' Retirement System (PSERS) is pursuing the second case and RWDSU/UCFW Local 338 Retirement Funds filed the third.

Pauley explained that the three separate litigations had filed for motions for consolidation and appointments for the lead roles. He also offered an explanation into the alleged losses that the three groups said they undertook during the mortgage debacle. Accordingly, the first group had "last in, first out" (LIFO) loss of about $20.2 million, PSERS reported a $9.8 million loss, and the union funds listed a $337,610 loss.

Furthermore, in his ruling, Pauley highlighted that the federal court approved PSERS representation Barrack, Rodos & Baccine as lead counsel because it is "competent and experienced." The pension fund also assumed lead plaintiff status as well. Previously, he stated that the nearly $50.8 billion PSERS file for the lead status with Swedish pension fund manager AP1, but that manager later withdrew itself from consideration.

On the final page of his nine page order, the district judge also noted that the "defendants do not oppose consolidation of these actions" because they "arise out of the same course of conduct by overlapping defendants with overlapping class periods." He added this grouping will also "serve the interests of judicial economy." 

BofA spokesman Bill Halldin declined to comment on the charges and Pauley's ruling this afternoon. However, Evelyn Tatkovski, the press secretary for the Harrisburg, Pa.-based system, noted to Investment Management Mandate Pipeline in an e-mail that it is "pleased with the court's decision."

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