Bank of America has reached a deal to end a lawsuit by scores of investors who claimed they lost millions purchasing overvalued Carolina waterfront property.
The terms of the settlement were not disclosed. The deal essentially ends a federal lawsuit that targeted the bank for its role in financing real estate purchases from the Woodbridge-based Total Realty Management.
A stipulation of dismissal of the claims against the bank was filed June 24. “Case settled[. T]erms are secret. Clients feel okay with result,” was the explanation from McLean lawyer Martin C. Conway
The investors, many of them Northern Virginia school teachers and administrators, claimed they were lured into no-money-down purchases by false promises of quick profits. Bank lenders allegedly helped the scheme by ignoring evidence of inflated land values and inflated buyer income.
U.S. District Judge Leonie Brinkema dismissed the claims against the bank in 2009, but reinstated the claims in 2010 based on evidence suggesting bankers knew about inflated land assessments.
Authorities charged a number of TRM employees with giving banks false financial information about the buyers.
A key player, former TRM chief financial officer Michael McCracken, was sentenced to 40 months in prison last month and ordered to repay more than $9 million. Others charged in connection with the operation received sentences between one and five years.
“The philosophy that caused this problem was that everyone was making money, so everything would always work out. Indeed, the philosophy superficially worked as long as home values continued to increase in value,” McCracken’s lawyer wrote in a sentencing brief.
By Peter Vieth