Bank of America 2006 Annual Report Download - page 132

On March 4, 2005, the trial court entered a judgment that purported
to award the plaintiff class restitution in the amount of $284 million, plus
attorneys’ fees, and provided that class members whose accounts were
assessed an insufficient funds fee in violation of law suffered substantial
emotional or economic harm and, therefore, are entitled to an additional
$1,000 statutory penalty. The judgment also purported to enjoin BANA,
among other things, from engaging in the account balancing practices at
issue. On November 22, 2005, the California Court of Appeal granted
BANA’s request to stay the judgment, including the injunction, pending
appeal.
On November 20, 2006, the California Court of Appeal reversed the
judgment in its entirety, holding that BANA’s practice did not constitute a
violation of California law. On December 14, 2006, the California Court of
Appeal denied plaintiff’s petition for rehearing. Plaintiff has petitioned for
review in the California Supreme Court.
Municipal Derivatives Matters
The Antitrust Division of the U.S. Department of Justice (DOJ), the SEC,
and the Internal Revenue Service (IRS) are investigating possible anti-
competitive bidding practices in the municipal derivatives industry involving
various parties, including BANA, from the early 1990s to date. The activ-
ities at issue in these industry-wide government investigations concern the
bidding process for municipal derivatives that are offered to states,
municipalities and other issuers of tax-exempt bonds. The Corporation has
cooperated, and continues to cooperate, with the DOJ, the SEC and the
IRS.
On January 11, 2007, the Corporation entered into a Corporate Condi-
tional Leniency Letter (the Letter) with DOJ. Under the Letter and subject
to the Corporation’s continuing cooperation, DOJ will not bring any criminal
antitrust prosecution against the Corporation in connection with the mat-
ters that the Corporation reported to DOJ. Subject to satisfying DOJ and
the court presiding over any civil litigation of the Corporation’s coopera-
tion, the Corporation is eligible for (i) a limit on liability to single, rather
than treble, damages in any related civil antitrust actions, and (ii) relief
from joint and several antitrust liability with other civil defendants. No such
civil actions have been filed to date, but no assurances can be given that
such actions will not be filed.
Parmalat Finanziaria S.p.A.
On December 24, 2003, Parmalat Finanziaria S.p.A. was admitted into
insolvency proceedings in Italy, known as “extraordinary administration.”
The Corporation, through certain of its subsidiaries, including BANA, pro-
vided financial services and extended credit to Parmalat and its related
entities. On June 21, 2004, Extraordinary Commissioner Dr. Enrico Bondi
filed with the Italian Ministry of Production Activities a plan of reorganiza-
tion for the restructuring of the companies of the Parmalat group that are
included in the Italian extraordinary administration proceeding.
In July 2004, the Italian Ministry of Production Activities approved the
Extraordinary Commissioner’s restructuring plan, as amended, for the
Parmalat group companies that are included in the Italian extraordinary
administration proceeding. This plan was approved by the voting creditors
and the Court of Parma, Italy in October of 2005.
Litigation and investigations relating to Parmalat are pending in both
Italy and the United States, and the Corporation is responding to inquiries
concerning Parmalat from regulatory and law enforcement authorities in
Italy and the United States.
Proceedings in Italy
On May 26, 2004, The Public Prosecutor’s Office for the Court of Milan,
Italy filed criminal charges against Luca Sala, Luis Moncada, and Antonio
Luzi, three former employees, alleging the crime of market manipulation in
connection with a press release issued by Parmalat. The Public Prose-
cutor’s Office also filed a related charge against the Corporation asserting
administrative liability based on an alleged failure to maintain an organiza-
tional model sufficient to prevent the alleged criminal activities of its for-
mer employees. Preliminary hearings have begun on this administrative
charge and trial is expected to begin in the first quarter of 2007.
The main trial of the market manipulation charges against Messrs.
Luzi, Moncada, and Sala began in the Court of Milan, Italy on Sep-
tember 28, 2005. Hearing dates in this trial are currently set through July
2007. The Corporation is participating in this trial as a party that has been
damaged by the alleged actions of defendants other than its former
employees, including former Parmalat officials. Additionally, pursuant to a
December 19, 2005 court ruling, other third parties are participating in the
trial who claim damages against BANA as a result of the alleged criminal
violations of the Corporation’s former employees and other defendants.
Separately, The Public Prosecutor’s Office for the Court of Parma,
Italy is conducting an investigation into the collapse of Parmalat. The
Corporation has cooperated, and continues to cooperate, with The Public
Prosecutor’s Office with respect to this investigation. The Public Prose-
cutor’s Office has given notice of its intention to file charges, including a
charge of the crime of fraudulent bankruptcy under Italian criminal law, in
connection with this investigation against the same three former employ-
ees of the Corporation who are named in the Milan criminal proceedings,
Messrs. Luzi, Moncada and Sala.
Proceedings in the United States
On March 5, 2004, a First Amended Complaint was filed in a securities
action pending in the U.S. District Court for the Southern District of New
York entitled Southern Alaska Carpenters Pension Fund et al. v. Bonlat
Financing Corporation et al., which names the Corporation as a defendant.
The action is brought on behalf of a putative class of purchasers of Parma-
lat securities and alleges violations of the federal securities laws against
the Corporation and certain affiliates. After the court dismissed the initial
complaint as to the Corporation, BANA and Banc of America Securities
Limited (BASL), plaintiff filed a Second Amended Complaint, which seeks
unspecified damages. Following the Corporation’s motion to dismiss the
Second Amended Complaint, the court granted the Corporation’s motion to
dismiss in part, allowing the plaintiff to proceed on claims with respect to
two transactions entered into between the Corporation and Parmalat. The
Corporation has filed an answer to the Second Amended Complaint. The
putative class plaintiffs filed a motion for class certification on Sep-
tember 21, 2006, which remains pending. The Corporation also filed on
October 10, 2006 a motion to dismiss the claims of foreign purchaser
plaintiffs for lack of subject matter jurisdiction.
On October 7, 2004, Enrico Bondi filed an action in the U.S. District
Court for the Western District of North Carolina on behalf of Parmalat and
its shareholders and creditors against the Corporation and various related
entities, entitled Dr. Enrico Bondi, Extraordinary Commissioner of Parmalat
Finanziaria, S.p.A., et al. v. Bank of America Corporation, et al. (the Bondi
Action). The complaint alleged federal and state RICO claims and various
state law claims, including fraud. The complaint sought damages in
excess of $10 billion. The Bondi Action was transferred to the U.S. District
Court for the Southern District of New York for coordinated pre-trial pur-
poses with the putative class actions and other related cases against
non-Bank of America defendants under the caption In re Parmalat Secu-
rities Litigation.
On August 5, 2005, the U.S. District Court for the Southern District
of New York granted the Corporation’s motion to dismiss the Bondi Action
130 Bank of America 2006