Reuters: Bankruptcy News: U.S. judge tosses BofA suit vs FDIC over $1.7 bln investor losses

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U.S. judge tosses BofA suit vs FDIC over $1.7 bln investor losses Aug 26th 2013, 22:48 Mon Aug 26, 2013 6:48pm EDT * Judge says lacked jurisdiction to hear claims * Case arose from $2.9 billion Taylor Bean mortgage fraud By Jonathan Stempel Aug 26 (Reuters) - A federal judge on Monday threw out Bank of America Corp's lawsuit against the Federal Deposit Insurance Corp over $1.7 billion of investor losses stemming from the collapses in 2009 of a large regional bank and a large mortgage lender. The lawsuit concerned the FDIC's role as receiver for an banking unit of Alabama's Colonial BancGroup Inc and the implosion of Taylor, Bean & Whitaker Mortgage Corp, home to what federal prosecutors called a $2.9 billion mortgage fraud. Bank of America, as trustee for notes issued by Taylor Bean's Ocala Funding LLC unit, had contended that the FDIC wrongly denied claims by Ocala noteholders to recover from Colonial Bank. Among the buyers of Ocala's notes were Deutsche Bank AG and France's BNP Paribas SA. Last December, U.S. District Judge Barbara Rothstein in Washington, D.C. dismissed some of Bank of America's claims but let the Charlotte, North Carolina-based lender pursue claims on behalf of itself, Deutsche Bank and BNP Paribas. But on Monday, she dismissed those claims as well, saying the FDIC determination that there were not enough assets in Colonial's estate to pay general unsecured creditors deprived her of jurisdiction. "The No-Value Determination is a final agency action that is binding on this court and is preclusive as to whether there are now or ever will be assets sufficient to satisfy general unsecured claims against the Colonial receivership," she wrote. Rothstein said the only way for Bank of America to challenge this determination is under the Administrative Procedures Act, not through individual lawsuits against the FDIC. She dismissed the lawsuit with prejudice, meaning it cannot be brought again. Bank of America spokesman Bill Halldin declined immediate comment. The case arose from a scheme in which Taylor Bean sold fake loans to Colonial Bank and diverted money from Ocala, and gave Bank of America false collateral lists that misrepresented the status of loans in which Ocala supposedly had an interest. Former Taylor Bean Chairman Lee Farkas is serving a 30-year prison term following his April 2011 conviction on 14 counts of bank fraud, securities fraud, wire fraud and conspiracy. Prosecutors accused him of masterminding the $2.9 billion fraud, which they said occurred from 2002 to 2009. Taylor Bean was based in Ocala, Florida, and Colonial in Montgomery, Alabama. Colonial had $25 billion of assets when it collapsed in August 2009 and was the largest U.S. lender to fail that year. The case is Bank of America NA v. FDIC, U.S. District Court, District of Columbia, No. 10-01681. Link this Share this Digg this Email Reprints

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