BofA sued by shareholder over $10 billion AIG loss

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BofA sued by shareholder over $10 billion AIG loss

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The lawsuit seeks class action status on behalf of purchasers of Bank of America stock.

24 September,2011 10:37 am

A Bank of America Corp shareholder sued the bank on Friday for what he said was a failure to disclose it potentially owes more than $10 billion to American International Group Inc in connection with mortgage-backed securities.The lawsuit, filed in U.S. District Court in Manhattan, seeks class action status on behalf of purchasers of Bank of America stock between February 25 and August 5 this year.AIG, which was bailed out by the government in the 2008 financial crisis, suffered losses of more than $10 billion from the securities, known as RMBS, between 2005 and 2007. The losses occurred after Bank of America and two companies it bought -- Countrywide Financial Corp and Merrill Lynch -- and subsidiaries sold AIG more than $28 billion in RMBS.Throughout the class period, defendants repeatedly informed investors about the claims of other entities for RMBS losses but not about the massive losses suffered by AIG, the lawsuit said.Lawrence Grayson, a spokesman for Charlotte, North Carolina-based Bank of America, said he had not seen the lawsuit and declined to comment.The court document said the shareholder losses occurred on August 8 as Bank of Americas stock dropped more than 20 percent to $6.51 per share from $8.17 per share after AIG sued the bank in New York state court seeking to recover the RMBS losses.This decrease was a result of the artificial inflation caused by the defendants misleading statements coming out of the price, Fridays lawsuit said.