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July 29, 2011 01:00 AM

Investors sue Bank of America, Countrywide

Barry B. Burr
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    CalPERS, Texas Teacher Retirement System, BlackRock and 12 other pension funds and investment management companies are suing Bank of America and others, alleging securities fraud involving mortgage lending of B of A's Countrywide Financial business.

    The suit, filed Thursday in U.S. District Court in Los Angeles, accuses the defendants of inflating Countrywide earnings by overstating the values from mortgage securitization and mortgage servicing rights.

    Other defendants include Countrywide, which Bank of America acquired in 2008; Angelo Mozilio, Countrywide former chairman and CEO; David Sambol, former president and chief operating officer; Eric P. Sieracki, former executive managing director and CFO; and KPMG, Countrywide's auditing firm.

    Messrs. Mozilo, Sambol, and Sieracki “blatantly issued materially false statements” between March 12, 2004, and March 7, 2008 — the time period cited in the suit — and “misled investors,” the 425-page complaint stated.

    The suit accuses KPMG of issuing “false and untrue (financial) statements when it issued an unqualified or ‘clean' audit opinion,” while it “failed to obtain reasonable assurance about whether Countrywide's financial statements … were free of material misstatements arising from error or fraud.

    “These prominent institutional investors made every effort to amicably resolve their claims for recovery of damages caused by the massive and pervasive fraud at Countrywide without filing formal litigation, but were unsuccessful,” Blair Nicholas, partner with the plaintiffs' law firm, Bernstein Litowitz Berger & Grossmann, said in a statement.

    The plaintiffs seek recovery of their investment losses and punitive and other damages, though the suit did not quantify them. Mr. Nicholas declined to comment on the amount.

    Scott Silvestri, Bank of America spokesman, couldn't be reached for comment.

    Dan Ginsburg, KPMG spokesman, said, “We don't comment on pending litigation.”

    Along with the California Public Employees' Retirement System, the Texas Teacher fund and BlackRock, other plaintiffs are the Maryland State Retirement and Pension System, Montana Board of Investments, TIAA-CREF, Norges Bank Investment Management, Royal Mail Pension Plan, PGGM Vermogensbeheer B.V., Government of Guam Retirement Fund, American Century, Nuveen, SunAmerica, T. Rowe Price and Thrivent Financial for Lutherans.

    Related Articles
    BofA settles Countrywide fraud claims from CalPERS, others
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