Dive Brief:
- A U.S. appeals court has resuscitated a Tutor Perini lawsuit alleging that Bank of America intentionally sold the general contractor nearly worthless auction-rate securities, according to Reuters. The First U.S. Circuit Court of Appeals in Boston previously dismissed the suit.
- California-based Tutor Perini claims that BofA urged it to buy millions of the debt securities in late 2007 despite knowing the $330 billion market for them was "one step away from illiquidity." Holders of those securities were left upside down on their investments when the ARS market froze in February 2008, according to Zacks.
- In the appeals court decision, Circuit Judge Ojetta Rogeriee Thompson said "deteriorating conditions" in the ARS market might have obligated BofA to alert clients to the new risks and update its recommendations. Thompson wrote that "a reasonable jury" might determine that the bank was aware of market conditions, was "taking steps to protect itself" but encouraged "an unsuspecting Tutor Perini to walk right off the cliff."
Dive Insight:
Tutor Perini's alleged losses as a result of BofA's actions — which it estimates at $50 million — came at a time when businesses, especially in the construction industry, were struggling to get through the Great Recession.
Publicly traded Tutor Perini is one of the largest construction companies in the U.S. and is involved in such diverse projects as the California high-speed "bullet train" project and the Hudson Yards development in New York City. Tutor Perini made news in June when the California High Speed Rail Authority approved the contractor's request for a $63.6 million change order to its $1 billion contract for delays and schedule acceleration fees. Tutor Perini said it was ready to begin the project in 2013 but that CHSRA did not make the land acquisitions necessary to allow the company to start construction.
The two projects it has under contract at the Hudson Yards development has also been a mixed bag for the company. Developers awarded the firm a $1.2 billion contract to build a mixed-use skyscraper there, which includes a million-square-foot retail component anchored by Neiman Marcus. Tenants have already moved into Tutor Perini's other project there, 10 Hudson Yards, known during construction as Tower C. However, during a January conference call, the company said its 2015 revenue was $500 million less than anticipated due to issues related to the construction of Tower C.