Woori Bank sues Merill over losses

New York: Bank of America Corp.'s Merrill Lynch unit was sued by Woori Bank over losses on $143 million (Dh525.35 million) in collateralised debt obligations (CDOs).

Woori, based in Seoul, claimed in a complaint filed Friday in Manhattan federal court that Merrill defrauded it in a series of transactions in 2005 and 2006, selling interests in seven CDOs designed to move toxic mortgage assets off Merrill's books.

Merrill used misleading credit ratings to hide the risks of mortgages underlying its CDOs and residential mortgage-backed securities, or RMBS, Woori said in the complaint.

"Defendants knew that the RMBS that they and other major banks were packaging into CDOs included a significant percentage of mortgages that violated basic underwriting standards and were likely to default," Woori said in its complaint.

Merrill was acquired in 2009 by Charlotte, North Carolina-based Bank of America.

Punitive damages

In its complaint, Woori claimed Merrill is liable for fraud, negligent misrepresentation and unjust enrichment. The Korean bank seeks damages of at least $143 million plus unspecified punitive damages. Earlier last week, Woori filed a similar complaint against Citigroup Inc. over $95 million in CDO investments by the South Korean bank.

James Griffiths, a Hong Kong-based spokesman for New York- based Citigroup, called Woori's allegations "totally without merit" and said the bank will defend itself in court.

"The Merrill Lynch and Citi complaints show that Wall Street bankers systematically disregarded their clients during the lead-up to the 2008 credit crisis," Christopher Lebsock, a lawyer representing Woori, said in an e-mail Friday.