Updates to our Terms of Use

We are updating our Terms of Use. Please carefully review the updated Terms before proceeding to our website.

Friday, March 29, 2024 | Back issues
Courthouse News Service Courthouse News Service

BofA Insiders Manipulated Auction Rate Securities Market, Say Small Shareholders

SAN FRANICSCO (CN) - Investors claim insiders at Bank of America manipulated the market for auction rate securities to increase their profits at the expense of small investors in a class action federal suit filed yesterday.

The suit states that Kenneth Lewis, Bank of America Chairman, CEO and President, and the other directors "stabilized" the market for auction rate securities, in which the company invested heavily, when the market showed any signs of not being liquid. Their illegal maneuvers included bidding on their own accounts without informing customers, allowing revised bids to be submitted after the market deadline and collaborating with some customers by having them bid at auctions and then compensating them in the secondary market with rates higher than the clearing rate set at the auction.

By 2007, more auctions were failing than succeeding as the market began to implode. The directors allegedly sold the securities to unsuspecting investors, leaving thousands of investors with millions of dollars of highly illiquid and essentially worthless investments.

The scheme could cost the company billions of dollars in settlements, fines and lost business and has made it the subject of investigations by the Securities and Exchange Commission and the New York Attorney General, according to the suit.

The plaintiffs want their money back, more corporate oversight for Bank of America and other relief the court deems appropriate. Michael Ram of the San Francisco Firm Levy, Ram & Olson represents the plaintiffs.

Categories / Uncategorized

Subscribe to Closing Arguments

Sign up for new weekly newsletter Closing Arguments to get the latest about ongoing trials, major litigation and hot cases and rulings in courthouses around the U.S. and the world.

Loading...