Bank of America 2008 Annual Report Download - page 162

Mortgage Trust Certificates pursuant or traceable to registration state-
ments that Merrill Lynch Mortgage Investors, Inc. filed with the SEC on
August 5, 2005, December 21, 2005, and February 2, 2007. The com-
plaint alleges that the registration statements misrepresented or omitted
material facts regarding the quality of the mortgage pools underlying the
Trusts, the mortgages’ loan-to-value ratios, and other criteria that were
used to qualify borrowers for mortgages. Plaintiffs seek to recover alleged
losses in the market value of the Certificates allegedly caused by the
performance of the underlying mortgages.
Public Employees’ Ret. System of Mississippi v. Merrill Lynch & Co.
Inc.
On February 17, 2009, a putative class action was filed against Merrill
Lynch and others in the U.S. District Court for the Southern District of
New York on behalf of persons who purchased Merrill Lynch Mortgage
Trust Certificates pursuant or traceable to registration statements that
Merrill Lynch Mortgage Investors, Inc. filed with the SEC on December 21,
2005 and February 2, 2007. The complaint alleges, among other things,
that the registration statements and related documents misrepresented
or omitted material facts regarding the underwriting standards used to
originate the mortgages in the mortgage pools underlying the Trusts.
Plaintiffs seek to recover alleged losses in the market value of the Certifi-
cates allegedly caused by the performance of the underlying mortgages or
to rescind their purchases of the Certificates.
In addition to the above class actions, Merrill Lynch is a respondent or
defendant in arbitrations and lawsuits brought by customers relating to
the purchase of subprime-related securities. Plaintiffs generally allege
causes of action for negligence, breach of duty, and fraud.
Merrill Lynch & Co., Inc. is cooperating with the SEC and other gov-
ernmental authorities investigating sub-prime mortgage-related activities.
Miller
On August 13, 1998, a predecessor of BANA was named as a defendant
in a class action filed in Superior Court of California, County of San Fran-
cisco, entitled Paul J. Miller v. Bank of America, N.A., challenging its prac-
tice of debiting accounts that received, by direct deposit, governmental
benefits to repay fees incurred in those accounts. The action alleges,
among other claims, fraud, negligent misrepresentation and other viola-
tions of California law. On October 16, 2001, a class was certified con-
sisting of more than one million California residents who have, had or will
have, at any time after August 13, 1994, a deposit account with BANA
into which payments of public benefits are or have been directly
deposited by the government.
On March 4, 2005, the trial court entered a judgment that purported
to award the class restitution in the amount of $284 million, plus attor-
neys’ 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 stayed 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 March 21, 2007, the California Supreme
Court granted plaintiff’s petition to review the Court of Appeal’s decision.
Municipal Derivatives Matters
The Antitrust Division of the U.S. Department of Justice (DOJ), the SEC,
and the IRS are investigating possible anticompetitive bidding practices in
the municipal derivatives industry involving various parties, including
BANA, from the early 1990s to date. The activities 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 con-
tinues to cooperate, with the DOJ, the SEC and the IRS. On February 4,
2008, BANA received a Wells notice advising that the SEC staff is
considering recommending that the SEC bring a civil injunctive action
and/or an administrative proceeding “in connection with the bidding of
various financial instruments associated with municipal securities.” An
SEC action or proceeding could seek a permanent injunction, disgorge-
ment plus prejudgment interest, civil penalties and other remedial relief.
Merrill Lynch & Co., Inc. is also being investigated by the SEC and the
DOJ.
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 crimi-
nal antitrust prosecution against the Corporation in connection with the
matters that the Corporation reported to DOJ. Subject to satisfying DOJ
and the court presiding over any civil litigation of the Corporation’s
cooperation, the Corporation is eligible for (i) a limit on liability to single,
rather than treble, damages in certain types of related civil antitrust
actions, and (ii) relief from joint and several antitrust liability with other
civil defendants.
Beginning in March 2008, the Corporation, BANA and other financial
institutions, including Merrill Lynch & Co., Inc., have been named as
defendants in complaints filed in federal courts in the District of Colum-
bia, New York and elsewhere. Plaintiffs purport to represent classes of
government and private entities that purchased municipal derivatives
from defendants. The complaints allege that defendants conspired to
allocate customers and fix or stabilize the prices of certain municipal
derivatives from 1992 through the present. The plaintiffs’ complaints
seek unspecified damages, including treble damages. These lawsuits
were consolidated for pre-trial proceedings in the In re Municipal
Derivatives Antitrust Litigation, MDL No. 1950 (Master Docket
No. 08-2516), pending in the U.S. District Court for the Southern District
of New York, and plaintiffs have filed a Consolidated Class Action com-
plaint in this matter. BANA, BAS, Merrill Lynch and other financial
institutions were also named in several related individual suits filed in
California state courts on behalf of a number of cities and counties in
California. These complaints allege a substantially similar conspiracy and
assert violations of California’s Cartwright Act, as well as fraud and deceit
claims. All of these state complaints have been removed to federal court
and are now part of In re Municipal Derivatives Antitrust Litigation, MDL
No. 1950 (Master Docket No. 08-2516). Motions to remand these cases
to state court were denied.
Beginning in April 2008, the Corporation and BANA received sub-
poenas, interrogatories and/or civil investigative demands from a number
of state attorneys general requesting documents and information regard-
ing municipal derivatives transactions from 1992 through the pres-
ent. The Corporation and BANA are cooperating with the state attorneys
general.
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
160 Bank of America 2008