businessweek.com | November 18, 2013
By Chris Dolmetsch
The $8.5 billion settlement reached with Bank of America Corp (BAC:US). on behalf of mortgage-bond investors was an “easy decision,” recovering more than twice what investors might have won through litigation, said an attorney for the trustee who negotiated the deal.
Matthew Ingber of Mayer Brown LLP in New York, who represented the trustee, Bank of New York Mellon Corp. (BK:US), today asked New York State Supreme Court Justice Barbara Kapnick in Manhattan to approve the settlement during closing arguments of hearing on the agreement.
American International Group Inc. and other objectors to the settlement “rolled the dice and lost,” Ingber told Kapnick. “The trustee chose finality and certainty and has $8.5 billion to show for it.”
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The accord, which includes more than $3 billion in servicing improvements, resolves claims over mortgages packaged into securities. It settles allegations the loans backing the bonds didn’t meet their promised quality.
Bank of New York Mellon, as trustee for more than 500 residential mortgage-securitization trusts, filed a petition in June 2011 seeking approval of the settlement under a state law that allows trustees to seek judicial consent for their actions.
While the settlement was backed by a group of more than two dozen investors including BlackRock Inc. (BLK:US) and Pacific Investment Management Co., almost four dozen investors objected, including AIG. Only 15 objectors remained opposed to the settlement remained as closing arguments began, Ingber said.
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The closing arguments that began today cap a hearing that started in June and stretched over a period of eight weeks, featuring testimony from almost two dozen witnesses and evidence from more than 200 documents.
Bank of America declined to participate in mediation talks proposed by AIG and other opponents of the settlement after Kapnick urged the parties to consider using a mediator to resolve their objections during a break in the hearing.
Ingber refuted the objectors’ arguments that investors weren’t given sufficient notice of the settlement, saying that the trustee mailed notices of the deal to beneficiaries, published it in domestic and international newspapers and placed banner advertisements on websites.
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Bank of America told AIG about the negotiations and offered it input into the talks, yet the insurer refused, and the objectors “sat on the sideline,” Ingber said.
Arguments that the trustee colluded with Bank of America on the settlement are “implausible,” Ingber said. The trustee had the discretionary power to enter the settlement and engaged in “arms-length” negotiations that were “hostile and contentious” and focused on the strengths and weaknesses of the claims, he said.
“The conflict theories are just not credible,” Ingber said. “The trustee acted with good faith and well within the bounds of its reasonable discretion. These objectors have had their day in court and so have we.”
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The case is In the matter of the application of the Bank of New York Mellon, 651786-2011, New York State Supreme Court, New York County (Manhattan).
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