The U.S. Justice Department Tuesday alleged Bank of America Corp. fleeced
investors by understating risks tied to $850 million in mortgage-backed
The department made the allegation in a civil lawsuit filed in U.S. District Court in Charlotte, N.C.
The lawsuit was filed the same day the U.S. Securities and Exchange Commission said Swiss banking giant UBS AG agreed to pay $50 million to settle charges it misled investors on mortgage-backed securities.
Attorney General Eric Holder called the Bank of America lawsuit "the latest step forward in the Justice Department's ongoing efforts to hold accountable those who engage in fraudulent or irresponsible conduct."
He said his department would "pursue a range of additional investigations" in the case, using "every tool, resource and appropriate authority to ensure stability, accountability and -- above all -- justice for those who have been victimized."
The government's complaint alleges more than 40 percent of 1,191 mortgages in a collateral pool for the securities didn't "substantially comply" with the bank's underwriting standards.
For instance, loans were based on overstated income, fake employment, inflated property appraisals, undisclosed debt, "and other red flags," the department said.
The No. 2 U.S. bank by assets knew of the problems but "concealed important risks" associated with the mortgages backing the securities, the department said.
Bank of America, based in Charlotte, said in a filing Thursday the Justice Department was weighing whether to bring a civil complaint against it over the allegations.
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