Bank of America sued by Deutsche Bank and BNP Paribas

Deutsche Bank and BNP Paribas have launched separate lawsuits against Bank of America over allegations it failed to safeguard money they had invested in mortgage-related transactions.

BNP Paribas and Deutsche Bank bought $1.7 billion worth of asset-backed notes from Ocala Funding LLC, a mortgage-loan funding organization run by Taylor, Bean and Whitaker Mortgage Corporation.

Bank of America was the trustee in the deal and when Taylor, Bean and Whitaker went bankrupt in August, the European banks asked for their investment back from the US financial institution.

Deutsche Bank originally invested $750 million into the Ocala scheme in December 2007 and put in a further $450 million on June 30th 2008.

On the same date, BNP Paribas and Deutsche Bank put in an extra $481 million as a joint investment.

Bloomberg reported that Deutsche Bank said in its lawsuit: "[We] trusted that Bank of America, one of the nation's largest and most well-known financial institutions, would perform the gatekeeper function reasonably and responsibly.

"In myriad ways, Bank of America failed to carry out its various duties designed to protect Deutsche Bank's investment."

But a spokesman for the US organization described the lawsuit as "misguided" and stated that Bank of America had only had a "limited administrative role" in the handling of the Ocala account.

In a separate case, Bank of America has asked a Manhattan federal court to dismiss a claim from an investor who has said that the bank misled investors about the $3.6 billion paid in bonuses to Merrill Lynch executives after it had purchased the financial consultancy.

Lawyers operating for the bank submitted an 87-page filing to the judge stating that it was common knowledge the payments were to be made, reports Reuters.

The bonuses were paid despite Merrill losing $15.84 billion in the final three months of 2008, although Bank of America said the bonus agreement was made before the losses began to accelerate.

By Gary Cooper