BofA Pays $2.43 Billion to Settle Merrill Lynch Suit
Rather than fight its way through court, Bank of America has dipped into its “litigation reserves” to settle a shareholder lawsuit over the dubious methods it used to acquire Merrill Lynch as the credit crisis ramped up.
Rather than fight its way through court, Bank of America has dipped into its “litigation reserves” to settle a shareholder lawsuit over the dubious methods it used to acquire Merrill Lynch as the credit crisis ramped up.
Investors sued the bank in 2009, saying its leaders misrepresented the financial well-being of both institutions at the time of the purchase. Bank of America denied the allegation, saying it was “entering into this settlement to eliminate the uncertainties, burden and expense of further protracted litigation.”
The bank bought Merrill Lynch for $50 billion on Sept. 15, 2008, the day Lehman Bros. collapsed.
As part of the settlement, Bank of America agreed to some vague improvement of its “corporate governance policies,” and to allowing shareholders to offer input — but not to decide — on executive pay.
— Posted by Alexander Reed Kelly.
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The move initially won praise for saving Merrill from possible collapse, but investors soon soured as it emerged that Merrill’s debts were far worse than first thought, reaching $15.84bn in the fourth quarter of 2008. The bank was also intending to honor $3.6bn in bonuses for Merrill’s top executives.
In a scathing memoir released this week, Sheila Bair, the former head of the Federal Deposit Insurance Company, said Ken Lewis, then Bank of America’s chief executive, was viewed as “somewhat as a country bumpkin by the CEOs of the big New York banks, and not completely without justification. He was a decent traditional banker, but as a deal-maker his skills were clearly wanting.”
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