\t\t\t\tThe 1st U.S. Circuit Court of Appeals in Boston has resuscitated Tutor Perini Corp.\u2019s (TPC) securities fraud lawsuit against Bank of America (BAC). Circuit Judge Ojetta Rogeriee Thompson said that a district court judge made a mistake when tossing the Massachusetts and federal securities claims accusing the bank of selling the construction company millions of dollars in auction-rate securities that it knew were about to fail.<\/p>\n
Tutor Perini, which is estimating over $50M plus interest in losses, claims that Bank of America persuaded it to purchase auction-rate securities (ARS) prior to the financial crisis, toward the end of 2007 and the beginning of 2008, even though it knew that the securities were on the brink of becoming illiquid. It was in February 2008 that the dealer stopped supporting the $330B ARS market, leaving investors with debt that was illiquid\u2014debt that they had been reassured time and again was liquid, like cash. Instead, investors were unable to access their funds.<\/p>\n
In 2015, the district court judge dismissed Tutor Perini\u2019s ARS fraud case, noting that Bank of America did not have the \u201cduty\u201d to reveal every fact about the risks involved to the construction company and that the bank had, in fact, already made a number of disclosures. Judge Thompson, however, said that because the auction-rate securities market was failing, this might have meant that Bank of America now had the duty to warn about the new risks, including those involving its earlier recommendations. Thompson noted that a jury could very well find that as the bank had sought to protect itself from the ARS market, it pushed the construction company toward greater exposure.<\/p>\n