Countrywide Financial Corp. lost a bid to settle a shareholder lawsuit over its $2.5 billion takeover by Bank of America Corp. when a judge ruled the agreement would wipe out some investor claims.
The proposed settlement, which gave shareholders more information about the July purchase of Countrywide, would wrongfully relieve the mortgage lender of having to face fraud allegations, according to Judge John Noble of the Delaware Chancery Court.
"Ensnared by the revised stipulation" in the settlement is an allegation that B of A's CEO Kenneth D. Lewis, made false statements when he "dismissed rumors of Countrywide's impending bankruptcy and asserted it 'had a very impressive liquidity plan,'" Noble said.
SRM Global Fund LP contends it held on to its Countrywide stock because of Lewis' assertions and lost $80 million.
Noble suggested including letting investors opt out of a settlement, filing a separate claim over Lewis' remarks or "abandoning" the case without a settlement.