A group of 18 financial institutions, including firm client Bank of America/ Merrill Lynch, commenced an action against MBIA in New York state court on May 13 alleging that the restructuring of its insurance business to establish a new municipal-bond insurance business constituted, among other things, a fraudulent transfer of $5 billion. This fraudulent restructuring enriched MBIA and its management at the expense of MBIA Insurance Corp. and its policyholders, including the plaintiffs.
In addition, Skadden is defending Merrill Lynch in an action in New York state court initiated on April 30 by MBIA Insurance Corp. and LaCrosse Financial Products, LLC, alleging that Merrill Lynch entities fraudulently misrepresented the quality of four CDOs in connection with related credit default swap transactions with a notional value of approximately $5.7 billion.