U.S. District Judge John G. Koeltl ruled that Bank of America Corp. investors cannot proceed with a lawsuit alleging they should have been warned that American International Group Inc. was preparing its own suit against the bank in 2011 over billions of dollars in mortgage-backed security losses, Bloomberg News reported yesterday. Bank of America “cautioned investors that it faced substantial and rising litigation risks,” Judge Koeltl said in his ruling posted yesterday. The judge also found that the likelihood of AIG litigation and its approximate cost were disclosed in the press and available to investors even though the specifics were allegedly not in the company’s public filings. The Charlotte, N.C.-based bank and its officers “argue correctly that the alleged omissions did not mislead investors because information about BoA’s exposure to MBS litigation generally, and AIG’s claim in particular, was in the public domain,” Koeltl wrote. AIG, the New York-based insurer, sued Bank of America in August 2011 over $10 billion in losses on mortgage-bond investments, saying that it was the victim of a “massive fraud.” The insurer said the bank and businesses it took over — Countrywide Financial Corp. and Merrill Lynch & Co. — misled AIG as they sought to profit from the bundling of mortgages into securities.
