NEW YORK (AP) — A federal appeals panel should reconsider its reversal of a fraud verdict against Bank of America Corp. and $1.2 billion penalty resulting from the bank's actions during the 2008 financial crisis, prosecutors say.
Prosecutors filed papers with the 2nd U.S. Circuit Court of Appeals in Manhattan late Thursday, saying that a three-judge appeals panel overlooked "a wealth of evidence" that the Charlotte, North Carolina-based bank sold thousands of toxic mortgage loans while misrepresenting them as investment quality.
They also cited a recent Supreme Court ruling clarifying law affecting the fraud case as a reason to reconsider.
In May, the appeals panel reversed a jury's finding that Bank of America and its Countrywide Financial unit committed fraud by misleading government housing agencies Fannie Mae and Freddie Mac in late 2007 and 2008. The ruling vacated a $1.27 billion penalty.
Bank of America through a spokesman declined comment Friday.
In their papers, prosecutors urged the court to at least return the case to the trial judge for a new trial so the government can present evidence and arguments that address the issues that caused the appeals court to reverse the verdict.
The government noted that the four-week trial came after years of investigation as the government sought to vindicate public interests in the integrity of the financial system.
The jury found that Countrywide executives deliberately misrepresented the quality of the mortgages that were sold as safe investments. The 2nd Circuit, however, found a "basic deficiency" in proof.
The trial resulted from claims by a former Countrywide employee that a division of Countrywide Home Loans that had specialized in subprime loans acted fraudulently after it transformed itself into a prime origination division after the subprime market collapsed in 2007. The United States later joined the lawsuit.
Prior to the housing collapse, Countrywide was one of many mortgage companies selling risky mortgages to Fannie Mae and Freddie Mac.
Bank of America, JPMorgan Chase and other big Wall Street banks paid out billions of dollars in legal settlements for their roles in the financial crisis.