Bank of America's Moynihan May Head Back for Countrywide Testimony

NEW YORK ( TheStreet) -- Bank of America ( BAC) CEO Brian Moynihan had so much fun giving sworn testimony about the bank's disastrous 2008 acquisition of Countrywide Financial to attorneys for MBIA ( MBI), he appears to be angling for a chance to do it again.

MBIA is suing Countrywide for fraud and breach of contract related to 15 mortgage securities, a case that is being watched closely since Bank of America still has untold billions on the line in related cases.
Bank of America CEO Brian Moynihan has repressed his memories of the disastrous acquisition of Countrywide

New York State Supreme Court Judge Eileen Bransten ruled in April that Moynihan would have to give testimony to attorneys for MBIA. Though Moynihan became Bank of America's CEO after the Countrywide deal had been completed, he played an important role in overseeing the integration of the two companies.

According to a May 4 court transcript recently released to the public, lead MBIA attorney Peter Calamari told Judge Bransten he "did the deposition of Mr. Monaghan sic " May 2. Calamari confirmed in a telephone interview that he was referring to CEO Moynihan, though he declined to discuss Moynihan's testimony, which is not available to the public.

Despite having taken Moynihan's testimony, Calamari complains, according to the transcript, that "I asked him about the meetings of the board discussing issues. He said, I don't remember. I need the minutes to remember."

Judge Bransten responded, "It's very simple. Mr. Moynihan will come back for another deposition when the minutes are produced."

However, according to Calamari's statements in court, Bank of America hasn't produced the minutes, one of several important documents he says it has been holding back.

"Your Honor, I have practiced law in this jurisdiction for nearly 40 years. And I have been involved in some of the biggest business cases that have faced this country. I have never seen more liberties taken with document production than what is going on in this case," Calamari told the judge.

Calamari eventually asked the judge to sanction Bank of America, a request the judge turned down in a June 4 decision.

"The conduct as related to the court is subject to interpretation, and the court does not find that the conduct raises to a sanctionable level," the judge wrote, adding, "This may change if Bank of America continues to conduct itself in a manner which may be interpreted as either deceptive or geared toward a goal of delay."

BTIG analyst Mark Palmer stated in a recent research note that he has "heard variations on a theory that Bank of America intends to drag out its litigation with MBIA until the bond insurer's structured finance unit exhausts its liquidity."

However, Palmer thinks that would take until mid-2013.

"Does Bank of America really want to go through a full year during which more and more damaging information about Countrywide could emerge through discovery, and nasty precedents could be handed down in Bransten's courtroom?" Palmer asks in his report.

Palmer doesn't think so. Rather, he believes Bank of America will eventually settle the case for $2-3 billion--a view that is the key to his recommendation of MBIA shares.

Still, Bank of America has already allowed the case to drag on much farther than Palmer would have expected.

"We have struggled to understand Bank of America's overall strategy regarding MBIA, particularly given our view that it would be imprudent for the bank to continue the litigation given the consequences of allowing information and precedents from the case to be used by many other plaintiffs to advance their own cases against Countrywide," Palmer wrote.

A call and an email message to a Bank of America spokesman were not returned. An MBIA spokesman declined to comment.

-- Written by Dan Freed in New York.

Follow this writer on Twitter.
Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.