Bank of America totally knew ahead of time about AIG's lawsuit against the bank over fudging loan level details, Reuters reports. Sources told Reuters that Bank of America knew about the $10 billion lawsuit seven months before the lawsuit was filed. BoA were hit with three new lawsuits Tuesday over their $8.5 billion mortgage settlement in June. Despite having knowledge of the threat of the lawsuit in January, the company failed to mention it in a quarterly regulatory filing with the SEC, and management never mentioned it, "on conference calls about quarterly results and other pending legal claims." AIG came to Bank of America in January to try and reach a settlement, but the two couldn't come to an agreement:
AIG raised such issues with Bank of America in January and said it planned to sue unless a settlement could be reached, sources familiar with the matter told Reuters. The sources either had direct knowledge of the legal proceedings or were briefed on them, but were not authorized to discuss the case publicly.
Both sides entered a "tolling agreement" to stop any legal statutes of limitation from running out while settlement talks were underway, but by March it became clear that AIG was prepared to sue for more than $10 billion, the people said.
Bank of America refused to give over information on 262,322 loans that AIG was examining during the settlement negotiations. The loans were all purchased by AIG between 2005 and 2007. The Atlantic's Teri Buhl reported in May that Bear Sterns' EMC was making information up while vetting information on loans they were buying from companies like Countrywide Financial, which was purchased by Bank of America in 2008, so the loans would fit the ratings agency's standards for higher rankings.
Reuters reports the SEC's rules on disclosure are murky, but Richard Rowe, a former director of the SEC's Division of Corporation Finance, while speaking generally, said "the general rule is, if it's threatened litigation and it's material, and you can put a number on it, you should disclose it."
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