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Objectors to $8.5 BLN BofA Pact Denied More Records

reuters.comAugust 2, 2012

By Karen Freifeld

Investors who are challenging a proposed $8.5 billion settlement with Bank of America Corp over mortgage-backed securities will not get additional records of negotiations that led to the agreement, a New York judge ruled on Thursday.

Rejecting a "very broad request" for records of the settlement negotiations, Justice Barbara Kapnick said the investors should instead seek testimony from witnesses to the negotiations.

The request was made by American International Group Inc and other investors who are still challenging the proposed settlement over toxic mortgage bonds issued by Countrywide Financial Corp. The value of the bonds fell as homeowners defaulted on their mortgages in the financial crisis. Countrywide was bought by Bank of America in 2008.

Walnut Place, a name used by Boston-based hedge fund Baupost Group, a major objector to the proposed settlement, lifted its objections and withdrew from court proceedings last month.

Kapnick, of New York state Supreme Court in Manhattan, must decide whether to approve the deal, which was reached in June 2011 with 22 institutional investors, including BlackRock Inc , MetLife Inc and Allianz SE's Pacific Investment Management Co.

Communications between Bank of America and Bank of New York Mellon, the trustee for securitization trusts that hold the mortgage securities, already have been turned over to AIG and others. Three-way communications between lawyers for the institutional investors, the trustee and Bank of America also have been produced.

The investors want records of settlement negotiations between the institutional investors and the trustee, and the international investors and Bank of America.

Dan Reilly, of Denver-based Reilly Pozner, who represents AIG, argued in court Thursday that more is necessary to determine whether the settlement makes sense.

"Is this $8.5 billion number a reasonable number?" Reilly asked. "How was it reached? From everything we've got so far, we still don't know."

Kathy Patrick, of Texas-based law firm Gibbs & Bruns, who represents the 22 institutional investors, said the other investors had "more than sufficient" information to assess the deal.

Patrick added that the institutional investors she represents do not get any different benefit than others.

"The $8.5 billion flows to all," she said.

The judge suggested the potential objectors depose representatives of Bank of New York Mellon and ask them whether a much higher settlement was ever on the table and other such questions.

"If there's some outrageously higher number talked about, I think you can explore that without having to go through all these settlement communications," the judge said, calling the depositions the next step.

Still, the judge left the door open for any objectors to seek some more communications later.

Other interveners include the attorneys general of Delaware and New York, who have raised questions about whether the settlement is reasonable.

The case is In the Application of The Bank of New York Mellon, New York State Supreme Court, New York County, No. 651786/2011.


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