Bank of America’s Laughlin Says Accord Talks Were Tense

Negotiations that led to an $8.5 billion mortgage-bond settlement between Bank of America and institutional investors were tense and combative, the bank’s chief risk officer testified.

The first meetings with investors who brought claims against the bank for breaches of representations and warranties were “very tense,” with both sides taking “very strong positions,” Chief Risk Officer Terrence P. Laughlin testified today in New York. The settlement talks that followed were also “contentious” and “adversarial” and Laughlin said he “got very upset” because he didn’t believe the investors were negotiating in good faith.

“I thought they were being extremely aggressive and one-sided in what they thought future losses would be coming out of these trusts,” Laughlin said. “The investors were putting forth a very negative scenario. They were trying to put forth a high loss number” in order to reach a higher settlement.

New York State Supreme Court Justice Barbara Kapnick is presiding over a nonjury trial in Manhattan over the accord, which resolves claims from Countrywide Financial mortgage-bond investors including Pacific Investment Management Co. and BlackRock, Inc. over loans bundled into securities. American International Group Inc. is fighting the settlement, saying Bank of America, based in Charlotte, N.C., isn’t paying enough to compensate investors.

The case is In the matter of the application of the Bank of New York Mellon, 651786-2011, New York State Supreme Court, New York County (Manhattan).