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Response to Tansy_Gold (Original post)

Tue Apr 24, 2012, 08:49 PM

18. Bank of America Accord in Lawsuit Is Challenged By GRETCHEN MORGENSON

 

http://www.nytimes.com/2012/04/21/business/bank-of-america-settlement-in-lawsuit-is-challenged.html?_r=1&ref=business

Lawyers leading a class-action lawsuit in federal court in Manhattan against the directors of Bank of America over its purchase of Merrill Lynch have agreed to settle the matter for $20 million even though damages in the case could reach $5 billion, according to plaintiffs in a parallel suit against the bank’s board in Delaware. Calling the settlement grossly inadequate and the result of collusion (THEM'S FIGHTING WORDS!-DEMETER), the lawyers in the Delaware case have asked P. Kevin Castel, the judge overseeing the New York matter, to order the parties agreeing to the deal to justify its terms.

If the settlement is approved by the Manhattan court, all damage claims made in the Delaware suit would be extinguished. That matter is scheduled to go to trial in October.

The settlement was struck privately on April 12 by lawyers representing two public employee pension funds that had sued the directors of Bank of America for breach of fiduciary duty. The funds are the Louisiana Municipal Police Employees’ Retirement System and the Hollywood (Florida) Police Officers’ Retirement System. At issue in both the federal and state suits is whether Bank of America’s board breached its duty to shareholders in approving the 2008 acquisition of Merrill Lynch for $50 billion and whether it misled investors about the brokerage firm’s weakening financial condition leading up to the purchase. Struck during the depths of the financial crisis by Kenneth D. Lewis, then Bank of America’s chief executive, the Merrill deal generated billions of dollars in losses at the bank. Those losses led to Bank of America’s second request for bailout money under the government’s Troubled Asset Relief Program.

According to the lawyers in the Delaware case, the $20 million deal is inadequate in several ways. First, the amount does not come close to the $150 million fine paid by the bank in 2010 to settle a Securities and Exchange Commission suit over the Merrill deal. Jed S. Rakoff, the federal judge overseeing that matter, said the evidence showed that the bank’s disclosures to shareholders about losses and employee bonuses at Merrill were inadequate. Judge Rakoff had rejected the initial proposal by the bank and the S.E.C. to settle the case for $33 million, calling it a contrivance at the expense of shareholders...
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LineReply Bank of America Accord in Lawsuit Is Challenged By GRETCHEN MORGENSON
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