Conway Release Aug 21

Commonwealth of Kentucky
Office of the Attorney General

Jack Conway
Attorney General

Capitol Building, Suite 118
700 Capitol Avenue
Frankfort, KY 40601-
3449
(502) 696-5300
Fax: (502) 564-2894

ATTORNEY GENERAL CONWAY ANNOUNCES $16
BILLION SETTLEMENT WITH BANK OF AMERICA
Kentucky Retirement Systems to Receive $23 Million from
Settlement

FOR IMMEDIATE RELEASE
August 21, 2014
Media Contacts:
Allison Martin
502-696-5651
or
Daniel Kemp
502-696-5659

FRANKFORT, Ky. (August 21, 2014) Attorney General Jack Conway, along with five other
state attorneys general and the U.S. Department of Justice (DOJ), today announced a $16.65
billion settlement with Bank of America Corporation to resolve federal and state claims against
Bank of America and its former and current subsidiaries, including Countrywide Financial
Corporation and Merrill Lynch. This resolution marks the largest civil settlement with a single
entity in American history. As a result of the settlement, $23 million will be returned to the
Kentucky Retirement Systems (KRS).

I am proud today to announce the recovery of $23 million for the Kentucky Retirement
Systems, Attorney General Conway said. It was clear that Bank of America defrauded our
pension system when it sold these high-risk products, and today we are holding them
accountable. The conduct of Bank of America was deplorable and driven by greed, at the
expense of homeowners who were targeted for risky loans and pension systems that bought the
loans that the bank pooled into a security product. As Attorney General, I will always stand up
for the hard-working people of Kentucky and protect their retirement security.

The Justice Department and the bank settled several of the departments ongoing civil
investigations related to the packaging, marketing, sale, arrangement, structuring, and issuance of
residential mortgage-backed securities (RMBS), collateralized debt obligations (CDOs), and the
banks practices concerning the underwriting and origination of mortgage loans. An RMBS is a
security that allows investors to buy into pooled residential mortgage loans. Many public
pension funds, including KRS, purchased these products.

As a result of the settlement, the bank acknowledges that it sold billions of dollars of RMBS
without disclosing to investors key facts about the quality of the securitized loans. When the
RMBS collapsed, investors, including KRS and other public pension funds, suffered billions of
dollars in losses. The bank has also conceded that it originated risky mortgage loans and made
misrepresentations about the quality of those loans to Fannie Mae, Freddie Mac and the Federal
Housing Administration (FHA).

"Thanks to General Conway's efforts, the Kentucky Retirement System will recover millions of
dollars resulting from the practices of bad actors in the financial industry that crippled the
economy and tanked investments across the country, Gov. Steve Beshear said. These
recovered funds will strengthen the pension system for the thousands of state and local retirees
and employees who depend on it."

Of the record-breaking $16.65 billion resolution, almost $10 billion will be paid to settle federal
and state civil claims by various entities related to RMBS, CDOs, and other types of fraud. Bank
of America will also pay a $5 billion civil penalty to settle the Justice Department claims under
the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA) the largest
FIRREA penalty ever. Approximately $1.8 billion will go to settling federal fraud claims related
to the banks origination and sale of mortgages, more than $1 billion will go to settling federal
and state securities claims by the Federal Deposit Insurance Corporation (FDIC), $135 million
will go to settling claims by the Securities and Exchange Commission.

Bank of America will provide the remaining $7 billion in the form of relief to aid hundreds of
thousands of consumers harmed by the financial crisis precipitated by the unlawful conduct of
Bank of America, Merrill Lynch and Countrywide. That relief will take various forms, including
principal reduction loan modifications that result in numerous homeowners no longer being
underwater on their mortgages and finally having substantial equity in their homes. It will also
include new loans to credit-worthy borrowers struggling to get a loan, donations to assist
communities in recovering from the financial crisis, and financing for affordable rental
housing. Bank of America has established a hotline number, 877-488-7814, which will provide
information to consumers.

Finally, Bank of America has agreed to place over $490 million in a Tax Relief Fund to be used
to help defray some of the tax liability that will be incurred by consumers receiving certain types
of relief if Congress fails to extend the tax relief coverage of the Mortgage Forgiveness Debt
Relief Act of 2007.

An independent monitor will be appointed to determine whether Bank of America is satisfying
its obligations.

In addition to Attorney General Conway, the attorneys general from five other states conducted
investigations that were critical to bringing about this settlement. The settlement also resolves
investigations conducted by the Securities and Exchange Commission (SEC) and litigation filed
by the Federal Deposit Insurance Company (FDIC).

This settlement is part of the ongoing efforts of the Financial Fraud Enforcement Task Force and
its RMBS Working Group, of which the Kentucky Office of the Attorney General is a
member. To date, the RMBS Working Group has recovered $36.65 billion for American
consumers and investors.

The RMBS Working Group
The RMBS Working Group is a federal and state law enforcement effort focused on
investigating fraud and abuse in the RMBS market that helped lead to the 2008 financial
crisis. The RMBS Working Group brings together more than 200 attorneys, investigators,
analysts and staff from dozens of state and federal agencies including the Department of Justice,
10 U.S. Attorneys Offices, the FBI, the Securities and Exchange Commission (SEC), the
Department of Housing and Urban Development (HUD), HUDs Office of Inspector General, the
FHFA-OIG, the Office of the Special Inspector General for the Troubled Asset Relief Program,
the Federal Reserve Boards Office of Inspector General, the Recovery Accountability and
Transparency Board, the Financial Crimes Enforcement Network, and more than 10 state
Attorneys General offices around the country.

You can follow Attorney General Conway on Twitter @kyoag, visit the Attorney Generals
Facebook page or view videos on our YouTube channel.

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Commonwealth of Kentucky

Office of the Attorney General

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