Bank of America Corp was hit with a lawsuit on Wednesday claiming the lending giant hid foreclosure problems that eventually led to a decline in its share price.
The suit, a proposed class action, says Bank of America concealed defects in the recording of mortgages, which harmed investors when the company had to temporarily discontinue foreclosures last fall.
We are reviewing the lawsuit and have no further comment at this time, said Bank of America spokeswoman Shirley Norton.
Along with other lenders like JPMorgan Chase & Co and Wells Fargo, Bank of America has been the subject of scrutiny over its foreclosure practices.
Attorneys General from 50 states kicked off an investigation last year amid questions about legal documents submitted in court.
And while litigation from angry borrowers has mushroomed, many of the leading U.S. class action firms have stayed out of the fray, citing the difficulty of recovering substantial damages.
Robbins Geller Rudman & Dowd, a major plaintiff firm known for bringing securities lawsuits, filed the case against Bank of America on Wednesday. Attorney Samuel Rudman was not available to comment.
The plaintiff, a union benefit plan, purchased nearly 25,000 Bank of America shares over three months last year at a high of $19.01, according to the court filing.
The day after news of the AG probe was announced last October, BofA's shares fell 69 cents from the previous day to close at $12.60, the lawsuit says.
It is unclear whether the plaintiff ever sold its shares. The lawsuit proposes a class made up of all who bought the stock between January 20, 2010 and October 19, 2010.
Bank of America concealed the fact that it did not have adequate personnel to process the huge numbers of foreclosed loans in its portfolio, the lawsuit says.
It also claims the bank concealed a practice of omitting billions of dollars in debt from its publicly reported balance sheet.
Along with the company, Bank of America Chief Executive Brian Moynihan and Chief Financial Officer Charles Noski were named as defendants.
Bank of America's stock closed at $14.24 on Wednesday, down 7 cents.
The lawsuit in U.S. District Court, Southern District of New York is Pipefitters Local No. 636 Defined Benefit Plan v. Bank of America Corp et al., 11-cv-733.
(Reporting by Dan Levine; Editing by Bernard Orr and Carol Bishopric)