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Attorney General Richard Cordray, Bank of America costs pensioners millions Over Merrill

By Amarendra Bhushan for CEOWORLD Magazine Updated:September 29, 2009

Ohio is leading five pension funds in suing Bank of America Corp. BofA (NYSE:BAC) over its purchase of Merrill Lynch & Co.

Ohio Attorney General Richard Cordray says the lawsuit against BofA, Merrill Lynch and executives, including BofA Chief Executive Kenneth Lewis, could eventually seek billions in damages.

The five pension funds are from Ohio, Texas, Sweden and the Netherlands.

According to Reuters , Attorney General Richard Cordray spoke after filing a 155-page complaint in Manhattan federal court that accuses Bank of America of fraudulently concealing Merrill’s soaring losses even as it let Merrill award $3.6 billion of bonuses in 2008.

Cordray is leading the case on behalf of five pension funds. Investors also want to recover from Bank of America Chief Executive Kenneth Lewis, Chief Financial Officer Joe Price, Chief Accounting Officer Neil Cotty, the bank’s board of directors, and former Merrill chief executive John Thain.

“The amount of shareholder value affected here, negatively, is about as great as has been alleged in any case, ever,” Cordray said in a press conference. He said damages “could well be in the billions of dollars,” and that the investors are “not looking immediately to settle.”

Bank of America spokeswoman Shirley Norton said: “We are confident we disclosed all that was required and look forward to presenting our position to the court.”

Through Friday, Bank of America shares had fallen 51 percent since the merger was announced on September 15, 2008. The shares were up 1.3 percent to $16.82 in afternoon trading.

The complaint, filed in U.S. District Court in New York, includes allegations made in previous complaints against Bank of America by other shareholder interests. It includes new details about conversations and communications between Bank of America and Merrill Lynch executives that have surfaced recently in media reports, congressional testimony and with the Securities and Exchange Commission.

“This is part of a concerted and committed effort in the Ohio attorney general’s office to hold Wall Street accountable,” Cordray said Monday. “The amount of shareholder value affected negatively here is about as great as has been alleged in any case ever.”

He said the suit seeks unspecified damages that could be in the billions of dollars.

“We are confident that we disclosed all that was required and look forward to presenting our position to the court,” said Bank of America spokeswoman Shirley Norton. Shareholders voted to approve the $50 billion acquisition of Merrill Lynch on Dec. 5, 2008.

The lawsuit alleges that Bank of America agreed to allow Merrill Lynch to pay as much as $5.8 billion in year-end discretionary bonuses to executives and employees but failed to disclose the bonuses before the merger vote.

It also alleges that Bank of America and Merrill Lynch executives were aware of billions of dollars in losses suffered by Merrill Lynch in the two months before the merger vote but failed to disclose them, Ap says.

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