Merrill Lynch, Securities Fraud, New Jersey 2014

NEWARK, N.J. – In a historic settlement, Bank of America’s subsidiary Merrill Lynch has agreed to pay $16.65 billion to resolve claims of securities fraud in the sale of residential mortgage-backed securities (RMBS) in 72 RMBS throughout 2006 and 2007.

The settlement was the result of a Financial Institutions Reform, Recovery and Enforcement Act (FIRREA) investigation led by Assistant U.S. Attorneys Leticia Vandehaar and David Feder, with the assistance of Auditor Barbara Radey, as part of the RMBS Working Group.

The investigation revealed that Merrill Lynch knowingly sold RMBS to investors with material underwriting and compliance defects, including as many as 55 percent in a single pool. The bank made these representations despite knowing that a significant number of the loans had defects.

As a result of the investigation, Merrill Lynch agreed to pay a $5 billion penalty, the largest FIRREA penalty ever, and provide billions of dollars of relief to struggling homeowners.

U.S. Attorney Paul J. Fishman praised the work of Vandehaar, Feder, and Radey, saying that their tireless work led to a record-breaking settlement that resolved the office’s imminent multibillion-dollar suit.

Attorney General Loretta Lynch recognized the three individuals with the Attorney General’s Award for Distinguished Service at a ceremony in Washington, D.C.

“The individuals being honored today stand out within a department that holds all of its employees and partners to an extremely high standard of excellence,” said Attorney General Lynch. “They have put in long hours, made immense sacrifices, and, in some cases, placed themselves in harm’s way. They have taken on issues that once seemed intractable, and made progress on problems that once seemed impossible.

The global settlement with Bank of America and its subsidiaries is a significant step towards holding accountable those responsible for the financial crisis.

Related Federal Cases