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BofA’s suit against FDIC thrown out

Judge said there weren’t enough assets to make payments on general creditor claims

The Federal Deposit Insurance Corp. (FDIC) can breathe a sigh of relief. On Monday, a judge tossed the suit Bank of America (BofA) filed against the FDIC over $1.7 billion in investor losses.

BofA filed the suit as a result of its role as trustee for Ocala Funding, a subsidiary of the now defunct Taylor, Bean & Whitaker Mortgage Corp., which failed after years of fraudulent activity. In 2011, Taylor Bean’s CEO Lee Farkas was convicted of masterminding a $3 billion mortgage lending scheme. He was sentenced to 30 years in prison and other Taylor Bean executives later came forward to admit involvement. The downfall of Taylor Bean also led to the collapse of Colonial Bank, which was Taylor Bean’s key funder.

In dismissing the suit, U.S. District Judge Barbara Rothstein in Washington, D.C., said the FDIC didn’t have assets to make payments on general creditor claims. She said in her dismissal that BofA’s claims “have no value and must therefore be dismissed because no case or controversy exists.”

In her ruling, Rothstein also said the court didn’t have jurisdiction to decide the case because “because the Colonial receivership will never have the assets necessary to satisfy a judgment” in favor of Charlotte, N.C.-based Bank of America.

Read more about this story on Bloomberg.

For more recent InsideCounsel stories involving the financial industry, see:

GE Capital under scrutiny over Thomas Petters’ Ponzi scheme

Bank of America intern found dead in London after allegedly working three nights in a row

Federal judge OKs $730M settlement between Citigroup and investors

SEC opens bribery investigation into JPMorgan’s Chinese operations

Social media’s hedge fund guru charged with fraud

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Cathleen Flahardy

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