Ethical Issues and Lawsuits Plague BofA’s Brand

Looking at BofA’s track record in court, it seems BofA has a history of abusing all its key constituencies. At some point or another over the last 10 years, BofA has been accused of sticking it to their customers, their shareholders, investors, the government and even their own employees.

How does the bank respond? With typically curt corporate expressions, like “BofA denies all allegations of wrongdoing” and they reached a settlement “to eliminate the uncertainties, expense and distraction of further litigation.”

Another shallow reply: “We are working aggressively to improve our process through formal training, enhanced checklists and improved communication.”

Yeah right. People will believe that when they see it.

“If we continue to see these lawsuits come up, at some point people are going to rise up and say maybe we need to break this thing up and have a different structure,” warns Paul Miller, an analyst at FBR Capital Markets.

Here’s a recap of some of the more notable lawsuits BofA has been forced to settle in recent years. The numbers are simply staggering.

$11.8 billion – Robosigning Foreclosures
A $25 billion agreement between the five largest mortgage servicers and the nation’s attorneys general addressed foreclosure abuses, specifically the notorious practice called robo-signing. BofA got hit with the biggest share of the settlement: $11.8 billion.

$9.7 billion – Auction Rate Securities Scandal
According to SEC complaints, BofA misrepresented to investors that Auction Rate Securities were safe, highly-liquid investments comparable to money markets. The SEC alleged that in late 2007 and early 2008, BofA knew that the ARS market was collapsing, so the bank purchased additional ARS inventory to prevent failed auctions.

$8.5 billion – Mortgage Securities Fraud
Investors who lost money on mortgage-backed securities they purchased before the housing collapse were awarded the largest payout of its kind. At the time, the settlement was greater than all of the bank’s total profits since 2008.

$624 million – Mortgage Securities Fraud
This settlement stemmed from a shareholder class action alleging that investors were misled investors about Countrywide’s financial condition and lending practices.

$461 million – Bond Fraud
BofA settled with WorldCom investors who bought bonds from BofA. The investors said BofA should have been aware of the massive criminal fraud taking place at WorldCom. BofA reached this settlement as closing arguments were being made, so they clearly did not like their chances.

$410 million – Unfair Overdraft Scheme
This huge settlement in 2011 was punishment for manipulating customers’ debit card transactions from highest to lowest dollar amount — rather than in the order they occurred — to trigger the greatest number of overdrafts possible.

$375 million – Mutual Fund Rigging
BofA paid $125 million in fines and $250 million in restitution for secretly allowing certain big investors to make rapid-fire trades in their mutual funds, and in some cases after the legal close of the trading day. This practice, called market-timing, enabled crony firms and individuals to profit at the expense of long-term investors — for the most part, small investors (e.g., John and Jane Mainstreet).

$335 million – Latino Discrimination Lawsuit
According to the DOJ’s complaint, BofA’s Countrywide subsidiary charged over 200,000 African-American and Hispanic borrowers higher fees and interest rates

$315 million – Misleading Investors
BofA allegedly misled investors about mortgage-backed investments sold by its Merrill Lynch unit.

$150 million – Misleading Investors
The bank again misled investors, this time about financial losses at Merrill Lynch prior to the acquisition of the brokerage firm. BofA had also approved huge bonuses for Merrill execs but failed to disclose that fact to shareholders who were evaluating the takeover.

$139 million – Bond Rigging
BofA admitted its employees rigged bids when marketing financial contracts linked to municipal bonds.

$108 million – Foreclosure Related Fees
Inflated fees for property inspections, appraisals and even as much as $300 for lawn mowing.

$100 million – Accounting Cover-up
BofA agreed to pay $100 million to resolve a lawsuit accusing the bank of helping Italian dairy Parmalat hide its debts which ultimately resulted in the creamery’s 2003 collapse.

$36 Million – Foreclosure Fees
BAC Home Loans Servicing illegally assessed millions of dollars in fees against struggling homeowners, in violation of an earlier settlement with the FTC.

$14 million – Revealing Customer Information
BofA settled claims that the bank disclosed customer information to marketers and third parties without permission.

$9 million – Unpaid Overtime
BofA settled a class action lawsuit brought by its California loan officers who sued to recover overtime back pay.

$7.5 million – Money Laundering
Penalties and costs in a settlement following an investigation that showed that the bank had ignored safeguards against money laundering in connection with the illegal transfer of $3 billion through the account of a Uruguayan company with ties to crime.

$5 million – Unfair Collections Practices
BofA’s credit card servicing unit used an arbitration service that was biased in favor of the bank and against consumers.

$4.1 million – Unpaid Overtime
BofA settled a class-action lawsuit filed by employees who said they were encouraged to work extra hours without filing for overtime. BofA had tried to skirt overtime rules with employees who held titles such as “client manager” but didn’t have the true managerial responsibilities that would have exempted them from OT pay. Each employee in the settlement received an average of over $9,000.

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