November 13, 2013
California customers of Bank of America may have heard that the financial institution asked a federal court to toss out two government lawsuits that accused BoA of defrauding its investors during the financial crisis.
The business litigation filed by the Securities and Exchange Commission and the U.S. Department of Justice alleged that the nation's second-biggest bank committed fraud in the sale of $850 million worth of residential mortgage-backed securities.
These kinds of suits are usually brought according to federal securities law, which requires authorities to prove that the defendant intended to break the law. In this case, the Justice Department used the rules created by the Financial Institutions Reform, Recovery, and Enforcement Act of 1989. That law is being used more and more in cases against banks that are linked to the financial crisis. One reason why is that FIRREA imposes a 10-year statute of limitations.
For its part, BoA accused the federal government of trying to expand those rules to the point of incoherence. The bank said in its motion that the Justice Department repeatedly stated that Bank of America violated securities laws but Justice had conspicuously avoided entering any claims under those same laws. That objection notwithstanding, Justice had recorded some victories using FIRREA, including one against BoA's Countrywide division for allegedly selling defective home loans to the federally controlled mortgage companies known as Fannie Mae and Freddie Mac.
Business litigation, whether over U.S. matters or over international business disputes, follows rules that are different from criminal law and may even seem counterintuitive to some of the parties involved. A legal professional may be able to assist clients in court during a corporate dispute or contract dispute that might otherwise seem overly daunting.
Source: Reuters , "Bank of America seeks U.S. mortgage bond lawsuits dismissal", Aruna Vicwanatha and Jonathan Stempel, November 08, 2013