Bank of America 2013 Annual Report Download - page 226

224 Bank of America 2013
The court granted final approval of the class settlement
agreement on December 13, 2013. Several class members have
appealed to the U.S. Court of Appeals for the Second Circuit. In
addition, a number of class members opted out of the settlement
of their past damages claims. The cash portion of the settlement
will be adjusted downward as a result of these opt outs, subject
to certain conditions.
Twenty-seven actions have been filed by merchant class
members who opted out of the settlement. The Corporation has
been named as a defendant in two of these opt out suits and, as
a result of various sharing agreements from the main Interchange
litigation, remains liable for any settlement or judgment in opt out
suits where it is not named as a defendant. All but one of the opt-
out suits filed to date have been consolidated in the U.S. District
Court for the Eastern District of New York.
LIBOR, Other Reference Rate and Foreign Exchange
(FX) Inquiries and Litigation
The Corporation has received subpoenas and information requests
from government authorities in North America, Europe and Asia,
including the DOJ, the U.S. Commodity Futures Trading
Commission and the U.K. Financial Conduct Authority, concerning
submissions made by panel banks in connection with the setting
of London interbank offered rates (LIBOR) and other reference
rates. The Corporation is cooperating with these inquiries.
Government authorities in North America, Europe and Asia are
conducting investigations and making inquiries of a significant
number of FX market participants, including the Corporation,
regarding conduct and practices in certain FX markets over multiple
years. The Corporation is cooperating with these investigations
and inquiries.
In addition, the Corporation and BANA have been named as
defendants along with most of the other LIBOR panel banks in a
series of individual and class actions in various U.S. federal and
state courts relating to defendants’ LIBOR contributions. All cases
naming the Corporation have been or are in the process of being
consolidated for pre-trial purposes in the U.S. District Court for
the Southern District of New York by the JPML. The Corporation
expects that any future cases naming the Corporation will similarly
be consolidated for pre-trial purposes. Plaintiffs allege that they
held or transacted in U.S. dollar LIBOR-based derivatives or other
financial instruments and sustained losses as a result of collusion
or manipulation by defendants regarding the setting of U.S. dollar
LIBOR. Plaintiffs assert a variety of claims, including antitrust and
Racketeer Influenced and Corrupt Organizations claims, and seek
compensatory, treble and punitive damages, and injunctive relief.
On March 29, 2013, the court dismissed the antitrust, RICO
and related state law claims and, based on the statute of
limitations, substantially limited the manipulation claims under
the Commodities Exchange Act that are allowed to proceed. The
court’s rulings will be applicable to later filed actions to the extent
they assert similar claims. The court is continuing to consider
motions regarding the remaining claims.
On June 14, 2013, the Monetary Authority of Singapore (MAS)
announced the results of its review of the submission processes
of panel banks, including BANA (Singapore Branch), relating to
reference rates set in Singapore, including the Singapore Interbank
Offered Rates (SIBOR), Swap Offered Rates (SOR) and reference
rates used to settle non-deliverable forward contracts. All of the
banks, including BANA (Singapore Branch), were found to have
deficiencies in governance, risk management, internal controls
and surveillance systems from 2007 to 2011 related to their
submission processes. All of the banks, including BANA (Singapore
Branch), were required to adopt measures to address these
deficiencies, report their progress in addressing these deficiencies
on a quarterly basis, and conduct independent reviews to ensure
the robustness of their remedial measures. Nineteen of the 20
banks were also required to deposit increased statutory reserves
with the MAS at zero percent interest for one year; BANA (Singapore
Branch) was required to deposit 700 million Singapore Dollars
(approximately $551 million U.S. dollars).
Montgomery
The Corporation, several current and former officers and directors,
Banc of America Securities LLC (BAS), MLPF&S and other
unaffiliated underwriters have been named as defendants in a
putative class action filed in the U.S. District Court for the Southern
District of New York entitled Montgomery v. Bank of America, et al.
Plaintiff filed an amended complaint on January 14, 2011. Plaintiff
seeks to sue on behalf of all persons who acquired certain series
of preferred stock offered by the Corporation pursuant to a shelf
registration statement dated May 5, 2006. Plaintiff’s claims arise
from three offerings dated January 24, 2008, January 28, 2008
and May 20, 2008, from which the Corporation allegedly received
proceeds of $15.8 billion. The amended complaint asserts claims
under Sections 11, 12(a)(2) and 15 of the Securities Act of 1933,
and alleges that the prospectus supplements associated with the
offerings: (i) failed to disclose that the Corporation’s loans, leases,
CDOs and commercial MBS were impaired to a greater extent than
disclosed; (ii) misrepresented the extent of the impaired assets
by failing to establish adequate reserves or properly record losses
for its impaired assets; (iii) misrepresented the adequacy of the
Corporation’s internal controls in light of the alleged impairment
of its assets; (iv) misrepresented the Corporation’s capital base
and Tier 1 leverage ratio for risk-based capital in light of the
allegedly impaired assets; and (v) misrepresented the
thoroughness and adequacy of the Corporation’s due diligence in
connection with its acquisition of Countrywide. The amended
complaint seeks rescission, compensatory and other damages.
On March 16, 2012, the district court granted defendants’ motion
to dismiss the first amended complaint. On December 3, 2013,
the district court denied plaintiffs’ motion to file a second amended
complaint. On February 6, 2014, plaintiffs filed a notice of appeal
to the U.S. Court of Appeals for the Second Circuit as to the district
court’s denial of their motion to amend.
Mortgage-backed Securities Litigation and Other
Government Mortgage Origination Investigations
The Corporation and its affiliates, Countrywide entities and their
affiliates, and Merrill Lynch entities and their affiliates have been
named as defendants in a number of cases relating to their various
roles as issuer, originator, seller, depositor, sponsor, underwriter
and/or controlling entity in MBS offerings, pursuant to which the
MBS investors were entitled to a portion of the cash flow from the
underlying pools of mortgages. These cases generally include
purported class action suits, actions by individual MBS purchasers
and governmental actions. Although the allegations vary by lawsuit,
these cases generally allege that the registration statements,
prospectuses and prospectus supplements for securities issued
by securitization trusts contained material misrepresentations and
omissions, in violation of the Securities Act of 1933, the Financial
Institutions Reform, Recovery, and Enforcement Act of 1989