Bank of America Corp, (NYSE:BAC) Amidst Impending Legal Action

Denver, CO, 07/30/2013 (Avauncer.com) – Shares of Bank of America Corp, (NYSE:BAC) fell 1.19% to close at $14.56 in its last trading session. This was close to the higher end of its 52-week price range of $7.10 to $15.03. Shares were traded at moderate levels, with 69.92 million shares exchanging hands, way below the average volume of 118.51 million shares.

The bank is alleged to have disbursed loans to unworthy applicants, putting company’s finances in jeopardy. The loan to a failed venture of Fontainebleau Las Vegas LLC, was recently sent back to the district court to resolve claims against the company for being negligent under the loan agreement. The project of the casino, at the north end of Las Vegas Strip, was initially budgeted for $2.9 billion. To make things worse for the company, the U.S. Court of Appeals in Atlanta in its July 26 examined whether the bank was right in disbursing funds to the project, despite being hit by the financial crisis in 2008. It is alleged that the loan, amidst the credit crunch which was spurred after Lehman Brothers’ bankruptcy was inappropriate, to say the least. The loan is said to have been contracted at an untimely manner, also because the borrower had failed to report its anticipated project costs. This has led to the prudent decision by some banks to drop its plans of providing debt to the project. The appeal under question also aims at challenging a U.S. district judge’s decision that the bank had acted in good faith, keeping by the words of the agreement it had already entered with the company.

The appeal seems to be largely in favor of the applicants, who though agreed with some of the district court’s judgment that the bank had rightly acted under its legal obligations, the bank was wrong prima facie to have disbursed the loan, when the borrower did not meet necessary conditions. This has led to gross negligence on the part of bank, which could lead to penalty and fines.