Daily Archives: August 19, 2012

Bank of America, JPM, Citigroup Face Billions In Losses in Antitrust Case

NEW YORK (TheStreet) — Private antitrust litigation pitting some five million retailers against Visa , MasterCard , and 13 large banks, including Bank of America and Citigroup has slipped under the radar of many analysts and investors who follow those companies, but the case may deliver a multi-billion dollar shock to bank bulls in the coming months.
Aside from Bank of America and Citigroup, the other banks that appear to have the most at stake as a result of the litigation in the U.S. Eastern District of New York are US Bancorp and JPMorgan Chase . All four face billions in potential losses.
Estimates of the potential cost of a settlement of the antitrust case vary dramatically–from a few billion dollars into the hundreds of billions. At least as worrisome to the financial companies, according to Deutsche Bank research, is the risk that a settlement or judge’s ruling could take the 2% “interchange” fees banks and card companies charge retailers on credit card transactions to as low as .5%, That would equal the rate in Australia, but still be higher than the .3% charged in the European Union, according to a report by Sanford Bernstein analyst Rod Bourgeois.
The impact of such a change would be several times as costly as the Durbin Amendment, which caps fees banks can charge on debit cards and is one of the new rules most hated by the big banks.
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Bank of America Drops Case Against TN trustee; Agrees to Pay Attorney Fees

Charlotte, N.C.-based Bank of America (NYSE: BAC) has dropped its legal attack on Nashville’s Chapter 13 bankruptcy trustee.
Earlier this year, as part of a consumer bankruptcy proceeding, Bank of America became the first lender to sue a Tennessee trustee of the court.
In an agreement filed Thursday, Bank of America worked out a deal directly with the debtors — dropping accusations that Chapter 13 trustee Henry “Hank” Hildebrand wasn’t dispersing money appropriately.
“They decided they would dismiss the lawsuit, pay my attorney fess and they apologized,” Hildebrand said.
In essence, Bank of America argued that it shouldn’t have to file a claim in the bankruptcy proceedings. That argument is tangential to efforts seeking an end to a common defense tactic used by debtors and foreclosure judges in the aftermath of the mortgage meltdown. Known as “show me the note,” the tactic forces a lender to offer up physical documentation that they actually own the mortgage.
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Foreclosure Woes Of The Rich And Famous

Deadly Clear

The depression of losing your home and the disruption to the family as a unit leaves a scar of shame thinking how could we have not seen the scheme? Maybe the thought that famous celebrities, who have “handlers”, agents, lawyers, accountants, and money managers also got run over by the foreclosure fraud bus driven by Wall Street banksters with a giant securitization Ponzi scheme will help to ease some of the pain. The fact of the matter is – we’re not alone. There are over 84 million American homeowners

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NAGLE vs BANK OF AMERICA | Suit Claims Hundreds Of Homeowners Were Tricked Into Paying $90 Million For Worthless Land

ASHEVILLE, N.C. (CN) – Fifteen frustrated customers claim Bank of America defrauded them by helping a now-bankrupt developer sell lots without mentioning that “roads, sewers, water, gas, or electric service” were not part of the deal.

In 15 separate federal complaints, homebuyers claim Bank of America aided and abetted the developer of Grey Rock, a subdivision of Lake Lure, N.C.

The bank was so aggressive it set up a booth next to the developer at the site to recruit customers, according to Robert Nagle’s complaint, which resembles the other 14.

The plaintiffs claim BofA helped push the lots, but failed to tell buyers that the developer was insolvent and could not complete the promised “amenities,” such as roads and utilities.

After selling 435 lots for $90 million, the developer filed for bankruptcy in 2008, without completing the subdivision, and with only $905 in its bank account, according to the complaint.

The developer(s) are not named as defendants. The only defendant is the bank.

“At the same time the developers and the bank were making representations concerning the numerous amenities that would be built in the community, as well as the timing of the construction of those amenities, the developers knew that developing the community was impossible because, among other reasons, they were negligently or intentionally permitting or causing the distribution of funds needed to construct the required infrastructure to themselves and to other entities, without consideration, thus rendering the developers insolvent and unable to meet their financial obligations,” according to Nagle’s complaint.

Nagle claims: “[Developer] LR Buffalo Creek’s business model, and that of its affiliated entities, was to sell lots first and build infrastructure later, or not at all. This led to what Land Resource founder and President J. Robert Ward has euphemistically called ‘trailing development obligations.’ Despite generating approximately $90,000,000 in revenue from the sale of lots and despite its ‘trailing development obligations,’ when LR Buffalo Creek filed for bankruptcy protection, it had only $905.00 in cash to its name.

“The bank was enriched by this scheme to sell lots at inflated prices to the plaintiff because, among other reasons, it received loan origination fees that were a percentage of the total amount of each loan that the bank made to individuals who purchased lots in Grey Rock; it received a stream of interest payments on the loans; its employees were compensated based on loan volume; and its executives were compensated in part based on stock performance, which was tied to the bank’s financial statements, which, in turn, were enhanced by these loans, at least in the short term.”

The buyers say Bank of America financed about half of the lots in Grey Rock and profited from the sales.

They say the bank offered risky loans with a loan-to-value ratio of up to 95 percent, which violated the bank’s own lending policy and federal regulations, and made false statements to induce consumers to buy lots in Grey Rock and similar developments.

Nagle claims he told a BofA officer that he was skeptical about financing a lot in Grey Rock with only 5 percent down, and the officer responded that he “was overly concerned and that since he had been out of banking for over ten years, he was out of touch.”

The plaintiffs claim Bank of America told buyers that lot prices were going up fast, so they had built-in equity, that the developers were selling lots “at the deepest discount” to attract buyers, and that buyers didn’t have to worry about whether they could afford the loans, since they would probably resell the lots before making any mortgage payments.

The buyers say Bank of America knew the high-volume, low-down-payment loans were risky, but encouraged loan officers to make them anyway, to increase the bank’s reported earnings, its stock price, and its executives’ compensation.

They claim the bank knew that the developers would not build the amenities, roads and utilities they had promised at Grey Rock.

And they say the bank used affiliated appraisers to inflate the prices of lots in Grey Rock and mischaracterized loans to generate higher interest payments, fees and commissions.

The buyers seek compensatory and treble damages for violations of the Interstate Land Sales Full Disclosure Act, deceptive trade, negligent misrepresentation and fraud.

Read on.

Goldman, Still Playing in Bayou’s Mud

THE story of the Bayou Group, the hedge fund firm that collapsed in a whirl of lies and drugs, was always a little weird. But it just keeps getting weirder.

You may recall Bayou — or at least its founder-turned-con man, Samuel Israel III. To the world, Mr. Israel was a trading whiz. Then, one August afternoon in 2005, the police responded to a 911 call from Bayou’s offices in Stamford, Conn., and found a note explaining how he had perpetrated a giant fraud.

Mr. Israel, it turned out, wasn’t managing a hedge fund at all. He was running a Ponzi scheme — a small-time version of the Madoff racket that, at that very moment, was still going strong. Mr. Israel, who said he’d become addicted to painkillers, was later sentenced to 20 years in prison — then two more for jumping bail, faking his suicide and going on the lam. His abandoned vehicle was found on the Bear Mountain Bridge over the Hudson River, the words “suicide is painless” written in the dust on the hood.

Read on.

Judge targets ‘piece of s—’ lawyer with bullseye poster during trial

A quirky Brooklyn judge lambasted a lawyer as a “piece of s—” and hung “Wanted” posters featuring the man’s photo — then drew a bull’s eye in red ink on the face, court papers allege.

Supreme Court Justice Arthur Schack — who has been hailed nationwide as a hero for standing up for the little guy in foreclosure cases — is in the crosshairs of lawyers trying to boot him off their case.

In papers filed in Brooklyn, lawyer John McDonough accuses Schack of the bizarre behavior and offers it as proof Schack should step down from a big-bucks civil trial against Duane Reade.

“Justice Schack has sufficiently revealed such a level of personal animus towards defendants’ counsel as to make it inappropriate for him to continue as the trial judge,” wrote lawyer Kenneth Fisher, McDonough’s partner.

The trouble started when a $100 million civil case involving a badly maimed woman, Shirly Miller, ended in a mistrial in April.

Read more: http://www.nydailynews.com/new-york/brooklyn/judge-targets-piece-s-lawyer-bullseye-poster-trial-article-1.1139146#ixzz23xDsrRwv