Insurance giant MBIA Inc., is facing another lawsuit over a controversial restructuring of the company as 18 major financial institutions sued the company today.
The civil suit, filed in New York State Supreme Court, alleges that MBIA illegally split its profitable municipal bond insurance business from its loss-making mortgage insurance portfolio.
The company has stated that objections to the split in previous suits were without merit and would contested.
MBIA had no comment about the latest case, according to reports.
The banks involved in the suit include Bank of America Corp., Barclays PLC, J.P Morgan Chase & Co., and UBS AG.
The banks allege that when MBIA split the businesses and transferred $5 billion in cash and securities to the municipal bond business it engaged in “fraudulent activity” and was attempting to escape its obligations to pay out insurance claims.
The suit claims that the mortgage business is now “effectively insolvent.”