Posted on Monday, April 4, 2011
The Securities and Exchange Commission (SEC) said last week that Bank of America, along with several other major servicers, must give shareholders a vote on whether or not the company must open up its foreclosure practices for an independent audit.
The SEC ruled that BofA must include the option on the ballot at its annual stockholder meeting this spring. But the company’s shareholders aren’t waiting for a formal investigation.
They filed a lawsuit this week with the New York State Supreme Court claiming they were damaged by the bank’s false and misleading statements intended to hide defects in the recording of mortgage notes and paperwork used to process foreclosures, according to a Bloomberg report.
The complaint lists CEO Brian Moynihan as the defendant. Bloomberg says the entire board of directors and several other executive officers are also targeted.
After robo-signing practices were exposed among Bank of America servicing execs and the lender suspended all foreclosure-related proceedings last fall, BofA’s stock price took a tumble. By late November, its shares were trading at just over $11, more than 40 percent below the trading price of that spring.
Citing verbatim from the complaint filed, Bloomberg says shareholders claim Bank of America “did not properly record many of its mortgages when originated or acquired, which severely complicated the foreclosure process when it became necessary.”
The news agency reports that stockholders also allege BofA concealed the fact that it was not adequately staffed to handle the large volume of foreclosure-bound loans within its portfolio, and that the bank’s directors and officers misclassified certain transactions in order to keep from recording them as debt in a practice called “dollar rolling.”
According to Bloomberg the shareholder lawsuit accuses Bank of America’s board and senior management of a breach of fiduciary duty, abuse of control, a waste of corporate assets, gross mismanagement, and unjust enrichment.
Bank of America did not immediately return requests for comment.
By: Carrie Bay, DS NEWS