This story originally appeared in The National Law Journal, an American Lawyer affiliate.

The U.S. Department of Justice on Tuesday filed suit against Bank of America Corp. and its affiliates, accusing them of lying to investors about the riskiness of residential mortgage-backed securities. In a parallel civil action, the U.S. Securities and Exchange Commission filed a lawsuit lodging similar allegations.

The Justice Department’s complaint, filed in the U.S. District Court for the Western District of North Carolina, accused Bank of America of making misstatements or failing to include information in materials given to investors and filed with the SEC about the quality of mortgages underpinning more than $850 million in securities sold in 2008.

“Today's filing marks the latest step forward in the Justice Department’s ongoing efforts to hold accountable those who engage in fraudulent or irresponsible conduct,” Attorney General Eric Holder Jr. said in a formal statement. The government “will continue to take an aggressive approach to combating financial fraud and uncovering abuses in the residential mortgage-backed securities market.”

A Bank of America spokesman, William Halldin, said in an email that the mortgages at issue "were prime mortgages sold to sophisticated investors who had ample access to the underlying data and we will demonstrate that."

"The loans in this pool performed better than loans with similar characteristics originated and securitized at the same time by other financial institutions," Halldin said. "We are not responsible for the housing market collapse that caused mortgage loans to default at unprecedented rates and these securities to lose value as a result."

Reed Smith partner Amy Greer, co-leader of the firm’s securities litigation and enforcement practice, represents Bank of America in the SEC case. In the Justice Department case, Skadden, Arps, Slate, Meagher & Flom partners John Carroll and Charles Smith are listed as representing the bank. Skadden is also listed as counsel in the SEC matter.

The parallel cases involve securities backed by "prime" mortgages, which were supposed to be safer than subprime or other mortgages sold to borrowers who had worse credit histories, little equity in the properties or who were less likely to live in the properties.

Assistant U.S. attorneys Daniel Ryan and Mark Odulio are handling the case for the Justice Department. The DOJ complaint said Bank of America "knowingly and willfully misled investors about the quality and safety of their investments" in certain residential-backed mortgage securities by, among other things, making "materially false and misleading statements."

The Justice Department claimed Bank of America didn't tell investors or include information in its SEC filings that the securities were backed by certain types of risky mortgages. For instance, according to the complaint, some of the mortgages were issued to self-employed borrowers, many of whom submitted information on their income and assets that Bank of America didn’t independently verify. Bank of America knew those mortgages "were even riskier," the government claimed, but failed to tell investors about the proportion of those mortgages included in the securities.

The complaint accused Bank of America of not doing due diligence to check the mortgages included in the 2008 securities, which "eliminated any meaningful check on the accuracy of statistical information concerning the loans contained in" materials provided to potential investors. Not doing the due diligence, the government said, saved the bank $15,000 in expenses.

Bank of America employees made admissions that the bank "emphasized quantity over quality when originating mortgages and that they were instructed by supervisors that it was not their job to discover fraud in mortgage applications," prosecutors alleged.

As a result, the government said, the number of defaulted and delinquent mortgages included in the 2008 securities was "abnormally high." As of June 2013, according to the complaint, more than 15 percent of borrowers whose mortgages were part of the 2008 pool had defaulted, causing more than $69 million in losses, and more than seven percent of the mortgages became delinquent.

The SEC’s lawsuit, also in the Western District of North Carolina, alleged securities law violations in connection with the same residential mortgage-backed securities.