LIES | Bank of America Kept AIG Legal Threat Under Wraps
Exclusive: Bank of America kept AIG legal threat under wraps
(Reuters) – Top Bank of America Corp lawyers knew as early as January that American International Group Inc was prepared to sue the bank for more than $10 billion, seven months before the lawsuit was filed, according to sources familiar with the matter.
Bank of America shares fell more than 20 percent on August 8, the day the lawsuit was filed, adding to worries about the stability of the largest U.S. bank. It wasn’t until Warren Buffett stepped up with a $5 billion investment that those fears were eased, though hardly eliminated.
The bank made no mention of the lawsuit threat in a quarterly regulatory filing with the U.S. Securities and Exchange Commission just four days earlier. Nor did management discuss it on conference calls about quarterly results and other pending legal claims.
The SEC’s rules for litigation disclosure are murky, and some lawyers said Bank of America may have been justified in not revealing AIG’s lawsuit before it was filed. The bank’s litigation disclosures are in line with those of many rivals.
But other lawyers said banks have an obligation to disclose legal threats that could have major consequences.
“Publicly owned companies are supposed to disclose material threatened litigation under generally accepted accounting principles,” said Richard Rowe, a former director of the SEC’s Division of Corporation Finance, who was commenting generally and not specifically about Bank of America.
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