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Wachtell, Skadden and Goodwin Procter take lead roles on Bank of America’s $16.6bn settlement

Wachtell, Lipton Rosen & Katz; Skadden Arps Slate Meagher & Flom and Goodwin Procter have taken the lead roles on Bank of America’s $16.6bn settlement with the US Department of Justice (DoJ), federal agencies and six US states.

In what is the largest civil settlement with a single entity in American history, Bank of America (BoA) has agreed to pay the sum of US$16.6bn after long-standing federal and state allegations that the BoA and its former and current subsidiaries, including Countrywide Financial Corporation and Merrill Lynch, sold mortgage-backed securities to investors that contributed to the real estate market collapse amid the 2008 economic downturn.

Of the record-breaking $16.6bn resolution, almost $10bn will be paid to settle federal and state civil claims by various entities related to RMBS, CDOs and other types of fraud. BoA will pay a total of $9.6bn in cash and provide approximately $7bn worth of consumer relief. The cash portion consists of a $5bn civil monetary penalty and $4.6bn in compensatory remediation payments.

Wachtell litigator Meyer Koplow advised BoA on the settlement, while Skadden Arps corporate and commercial litigator Charles Smith also represented defendant BoA and Merrill Lynch on the SEC portion of the deal. Goodwin Procter partners Brian Pastuszenski and Inez Friedman-Boyce advised other BoA entities on its deal with the Federal Deposit Insurance Corporation.

Litigation boutique Bailey & Glasser’s Benjamin Bailey and Grais & Ellsworth’s David Grais acted for the Federal Deposit Insurance Corporation (FDIC).

The settlement is part of the ongoing efforts of President Obama’s Financial Fraud Enforcement Task Force and its Residential Mortgage-Backed Securities (RMBS) Working Group, which has recovered $36.65bn to date for US consumers and investors.

US attorney Anne Tompkins for the Western District of North Carolina said: ‘[The] settlement attests to the fact that fraud pervaded every level of the RMBS industry, including purportedly prime securities, which formed the basis of our filed complaint. Even reputable institutions like Bank of America caved to the pernicious forces of greed and cut corners, putting profits ahead of their customers. As we deal with the aftermath of the financial meltdown and rebuild our economy, we will hold accountable firms that contributed to the economic crisis. [The] settlement makes clear that my office will not sit idly while fraud occurs in our backyard.’