Bank of America Corp. asked a federal court to dismiss a lawsuit brought by the U.S. that accuses the lender of misleading investors about the quality of loans backing $850 million in securities.
The government failed to meet the requirements for suing under the Financial Institutions Reform, Recovery and Enforcement Act, the bank said in a filing in federal court in Charlotte, N.C. That law is being put to use by prosecutors to bring mortgage cases against lenders.
“After a three-year investigation the complaint lacks even a single factual allegation suggesting that any bank employee took any affirmative step to conceal facts” about the securities, the bank said.
The government’s complaint, filed in August, chronicles friction among bank staff in 2007 and 2008 as they excluded risky “alt-A” loans while leaving in wholesale debts once scorned as “toxic waste” by the firm’s then-chief.
According to the complaint, an employee of the Charlotte-based lender sent an email to a trader and others expressing frustration over efforts to add poor-quality mortgages to the pool backing securities at issue in the case.
Referencing the substandard mortgages, he wrote “like a fat kid in dodgeball, these need to stay on the sidelines,” according to the filing.
