A federal judge in New York has refused to dismiss shareholder lawsuits against Bank of America Corp and various executives and directors over the purchase of Merrill Lynch & Co. during the 2008 financial crisis and disclosures about Merrill’s losses and bonus payouts. U.S. District Judge P. Kevin Castel issued the ruling. Bank of America and former Chief Executive Kenneth Lewis have denied civil fraud charges made in a separate lawsuit by New York Attorney General Andrew Cuomo over the merger.
Problems at Merrill had allowed Bank of America to get a second infusion of federal bailout money. The bank was also criticized for not disclosing Merrill’s soaring losses in a timely manner and for letting Merrill pay $3.6 billion of bonuses at the time. Merrill’s losses reached $15.84 billion in the fourth quarter of 2008. Judge Castel declined to dismiss some of the claims related to alleged material misstatements over Merrill’s bonuses and the scope of Merrill’s losses. Another claim related to whether the bank intentionally hid an agreement with regulators to obtain bailout money.
Claims over whether the bank should have conducted better due diligence, and should have revealed why it considered invoking a contractual clause to back out of the merger, were dismissed. Earlier this year, Bank of America settled a U.S. Securities and Exchange Commission civil fraud case over the merger. In a separate ruling, a lawsuit by Bank of America employees over losses in retirement plans, where the bank’s stock was an investment option, was dismissed.
Source: Insurance Journal
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