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Bank of America dismissed from lawsuit

Bank of America Corp. on Wednesday won dismissal in a U.S. federal court of an investor class-action lawsuit that accused the No. 2 U.S. bank of helping Italian food company Parmalat Finanziaria SpA commit securities fraud.
/ Source: Reuters

Bank of America Corp. on Wednesday won dismissal in a U.S. federal court of an investor class-action lawsuit that accused the No. 2 U.S. bank of helping Italian food company Parmalat Finanziaria SpA commit securities fraud.

The plaintiffs had sought to hold the bank liable for its actions related to a 1999 Parmalat private placement, and to various loans backed by funds from private debt placements. They also claimed the bank knew of Parmalat's true value, but was "motivated to participate" in a fraud to keep its lucrative banking relationship with the company.

In his 74-page decision, Judge Lewis Kaplan of the U.S. District Court in Manhattan also dismissed claims against Citigroup Inc. over its role in various transactions, as well as its alleged role in approving a 2003 Parmalat press release related to a Citigroup financing vehicle, Buconero LLC. Buconero means "black hole" in Italian.

Kaplan, however, left intact claims against Citigroup and Italy's Banca Nazionale del Lavoro SpA involving allegedly worthless invoices. He also refused to throw out claims that Credit Suisse Group Inc.'s Credit Suisse First Boston unit designed some transactions it knew Parmalat would use to conceal debt.

The lawsuit was filed on behalf of investors who bought Parmalat securities from 1999 through 2003. The 368-page complaint details various alleged fraudulent acts by Parmalat and the banks.

Parmalat, known for its long-life milk, filed for insolvency in December 2003 under the weight of about 14 billion euros ($16.9 billion) of debt, after learning of a 4 billion euro ($4.84 billion) hole in its accounts.

Citigroup spokeswoman Andrea Hurst said that world's largest bank "is pleased that the court dismissed a significant portion of the claim," and was confident it would prevail on the remaining claim.

Credit Suisse spokesman Pen Pendleton declined to comment. Calls to the other banks were not immediately returned.

Kaplan's decision does not affect the $10 billion lawsuits that Parmalat's administrator, Enrico Bondi, has filed against Bank of America, Citigroup, and former Parmalat auditors Deloitte & Touche and Grant Thornton. Bondi has sued some 50 banks over Parmalat's collapse.

Many of the banks' arguments in the investor lawsuit turned on a 1994 U.S. Supreme Court ruling that the banks said freed them from civil liability for aiding and abetting securities fraud at Parmalat.

Kaplan said the banks argued that "they merely structured or participated in transactions that Parmalat misdescribed." In contrast, the plaintiffs said the banks were liable as "primary violators."

The judge separately dismissed some claims against BNL and Credit Suisse involving non-U.S. investors, saying he lacked jurisdiction.

He gave the plaintiffs until August 8 to amend their complaint.