A Chicago company sued Bank of America Corp. in an attempt to recover nearly $23 million it says it lost due to misleading investment advice.
Independence Tube Corp., a manufacturer of structural steel tubing, claims that the bank falsely presented auction rate securities as “safe, liquid, short-term cash equivalents that were an attractive alternative to money market investments,” according to the suit filed Tuesday in U.S. District Court for the Northern District of Illinois.
A Bank of America spokeswoman declined to comment on the suit.
Auction rate securities are a long-term bond that acts like cash. The market for the investment vehicle collapsed in February; that prompted an investigation from federal regulators and the New York attorney general after allegations that B of A and other financial institutions misled investors about the risk of such securities.
Bank of America recently settled the charges by agreeing to pay a $50-million penalty, in addition to buying back $4.7 billion worth of auction rate securities. B of A did not admit to any wrongdoing as part of its settlement.
Independence Tube, however, was prohibited from recouping any part of its investment because the buyback program only extended to businesses that purchased up to $15 million in auction rate securities. The Chicago company had bought nearly $23 million in auction rate securities that were tied to student loans.
The company claimed in its suit that it attempted to recover its investment on the grounds that B of A violated Illinois and federal securities laws but that meetings with bank officials and letters demanding action have been denied and ignored.
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