N.Y. court set to decide on BofA $8.5 billion settlement

AIG opposes the settlement, calling it “pennies on the dollar”

Will Bank of America’s $8.5 billion settlement with a group of investors, including BlackRock Inc. and Pacific Investment Management Co., that lost billions in the financial crisis stand? That’s for a New York court to decide on Nov. 18 in the investor group’s ongoing fight with AIG.

Bank of America reached the agreement with the investor group in June 2011 in order to resolve liabilities tied to faulty mortgages that have driven the company’s legal and regulatory losses up to $5.1 billion already. Lawyers for the investor group are to appear in New York state court on Nov. 18 to argue for the settlement’s validity.

However, not all believe the settlement should stand. According to Bloomberg, American International Group Inc. (AIG) said that the deal is for “pennies on the dollar,” while investor losses reached as much as $100 billion as a result of failed mortgage-backed securities.

“This settlement — which resulted from a process that reeks of collusion and is infected with countless disabling conflicts — could not become the hallmark of conduct for which future trustees strive, but rather the beacon for what should be avoided,” opponents said in a court filing.

The investor group, however, believes that dissenters are shooting for money that they ultimately will not be granted. “The objectors offer a pretend world: one in which there is an ostensibly perfect, riskless and larger result to be had through litigation,” the investors said in a court filing.

Isaac Gradman, an attorney at Perry, Johnson, Anderson, Miller & Moskowitz, told Bloomberg that there is no clear indication of what will be the court’s final ruling. “This one is really tough to call because it’s so unprecedented, it’s so broad in scope and it has such a major impact,” said Gradman. “Ultimately it comes down to her gut feeling whether the deal is reasonable and constructed in a reasonable way.”

 

Bank of America has seen its fair share of legal troubles lately. Check them out with us:

U.S. government seeks $863.6M following BofA fraud ruling

On the forefront of the biggest settlements of our time

BofA raises estimate from potential legal, regulatory losses to $5.1B

Countrywide found liable for selling defective loans

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Zach Warren

Zach Warren is Assistant Editor of InsideCounsel magazine, where he oversees online content submissions and administers InsideCounsel's enewsletters. Zach specializes in new media and multimedia...

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