Dow Jones
NEW YORK A group of institutional investors led by American International Group Inc. have accused Banc of America Securities LLC and First Union Securities Inc. of fraud in connection with two offerings of asset-backed securities issued by Heilig-Meyers Master Trust.
A lawsuit filed Thursday in Manhattan federal court in New York, accuses the bank units of actionable misconduct in their role as underwriters of the trusts offerings and seeks at least $460 million in damages.
Banc of America Securities is a division of Bank of America Corp. of Charlotte, N.C., and First Union Securities was a division of First Union Corp., also of Charlotte, now Wachovia Corp.
AIG and 11 other investors mostly large insurers such as Allstate Corp. and Citigroup Inc.s Travelers Insurance Co. say they were misled by false statements pertaining to the offerings.
Heilig-Meyers, the nations largest publicly held specialty retailer of home furnishings, filed for bankruptcy protection in August 2000. Heilig-Meyers Master Trust was formed in February 1997 to hold installment sales contracts and issue asset-backed securities.
During 1997 and 1998 the trust issued asset-backed securities that were purchased by Banc of America and First Union and then resold to the institutional investors.
The investors claim they bought the securities on the basis of the banks false assurances that Heilig-Meyers servicing practices, procedures, and records were reasonable and effective. The investors also contend the banks failed to disclose credit risks associated with the purchases.
Spokesmen for First Union Securities and Banc of America Securities could not be reached for comment.
