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If Bank of America is ''free from liability on fraud claims, that increases the exposure of other fraud defendants and the pressure on them to settle,'' says one observer.
Stephen Taub, CFO.com | US
August 10, 2005
A federal judge has pared down the scope of a $10 billion lawsuit, filed by Parmalat Finanziaria SpA against Bank of America, which asserts that the bank helped Parmalat commit a massive financial fraud, according to the New York Law Journal.
Judge Lewis Kaplan of U.S. District Court in Manhattan dismissed 10 of the 12 claims made by the Italian conglomerate, reported the Law Journal, allowing only claims of conspiracy and breach of fiduciary duty to stand. The judge did permit Parmalat to replead one of the charges, according to the report.
"It's good news for the Bank of America because it was able to get rid of some claims without ever having to face a jury," Steven Thel, a professor at Fordham University School of Law, told Reuters. "If it is free from liability on fraud claims, that increases the exposure of other fraud defendants and the pressure on them to settle."
Enrico Bondi, the administrator appointed by the Italian government to run Parmalat, sued a number of banks as well as the company's former auditors, Deloitte & Touche and Grant Thornton, claiming they played a role in the company's fraud, which caused it to file for bankruptcy in December 2003.
Bondi insists that a number of Bank of America transactions were designed to hide Parmalat's growing financial crisis, according to the Law Journal. For example, he reportedly accuses Bank of America of disguising loans to a Parmalat subsidiary totaling $300 million as an equity investment.
Bank of America spokeswoman Rhiannedd Brooke told Reuters the bank was "delighted" with the decision and would defend vigorously against the remaining claims. She added that the bank had more than $462 million of financial exposure to Parmalat.
Loren Kieve, a partner at Quinn Emanuel Urquhart Oliver & Hedges, which represents Bondi, told Reuters, "We don't believe [the ruling] affects the bottom line for the plaintiff. It was a $10 billion lawsuit, and still is a $10 billion lawsuit."