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Member, Beacon International Group, Ltd.
NEW YORK (Reuters)—A New York state appeals court on Tuesday dismissed a lawsuit in which bond insurer MBIA Inc. accused Merrill Lynch & Co. of fraud in connection with credit default swaps on about $5.7 billion of debt.
Lacrosse Financial Products L.L.C. had sold the swaps to Merrill, and MBIA insured these swaps, court papers show. According to the complaint, Merrill, now a unit of Bank of America Corp., misled MBIA into entering these agreements as part of a scheme to "offload billions of dollars" of subprime mortgages and other risky debt by packaging them into CDOs or hedging exposure through swaps.
A lower court judge dismissed five of the six original claims. In Tuesday's ruling, the New York State Appellate Division in Manhattan dismissed the remaining breach of contract claim.