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CalPERS, other investors, settle suit against Countrywide, BofA

November 22, 2011 |  5:02 pm

AngeloatcourtIrfanKhan
California's giant public pension fund and 15 other large investors settled lawsuits accusing former mortgage goliath Countrywide Financial Corp. of costing them billions of dollars in stock losses by failing to disclose the severity of the risks posed by the easy-money loans the Calabasas lender handed out during the housing boom.

A filing Monday in U.S. District Court in Los Angeles disclosed the confidential settlement. The filing did not reveal how much Bank of America Corp., which acquired Countrywide in 2008 and was also a defendant in the case, would pay to the California Public Employees' Retirement System and the other plaintiffs.

Bank of America's spokeswoman for legal affairs, Shirley Norton, declined to comment. An attorney for CalPERS and the other 15 investors didn't return a call Tuesday, and CalPERS officials declined to describe the settlement.

The 16 big investors, mostly pension and mutual funds, were among 33 plaintiffs who opted not to participate in a $624-million settlement of class-action litigation that U.S. District Judge Mariana R. Pfaelzer approved in February.

The opt-outs believed the proposed settlement was "shockingly cheap," Columbia University securities law expert John C. Coffee said at the time, citing a discussion with one of the lawyers representing those institutions.

Seventeen additional institutional investors who decided against participating in the February settlement still have claims pending in the case.

This week's settlement, if approved by Pfaelzer, would end the 16 plaintiffs' claims against Countrywide, Bank of America, and former Countrywide executives Angelo R. Mozilo, David Sambol and Eric P. Sieracki.

Accounting firm KPMG, which had audited Countrywide's books, is also a defendant in the case but did not settle with CalPERS and the other funds. It was a participant in the $624-million settlement finalized in February.

Bank of America, based in Charlotte, N.C., has struggled to put Countrywide's woes behind it since it shelled out $2.5 billion in stock for what was then the country's largest mortgage lender.

After running up more than $30 billion in losses on its investment, Bank of America still has undetermined liabilities outstanding for claims against soured Countrywide loans and the mortgage securities that were backed by them.

The Countrywide troubles have caused regulators to pressure Bank of America to increase its capital cushion against losses, and investors have punished the bank's stock, which has declined by 59% this year. Bank of America closed Tuesday down 12 cents, or 2.2%, at $5.37.

RELATED:

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Judge OKs Countrywide settlement but big investors opt out

California reportedly subpoenas BofA over toxic securities

-- E. Scott Reckard

Photo: Dark glasses can't conceal Countrywide Financial co-founder Angelo Mozilo. Credit: Los Angeles Times / Irfan Khan

 

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