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| Merrill Lynch & Co. Inc. has reached settlements in two cases tied to its investments in subprime collaterallized debt obligations. The formerly independent firm will fork out more than a half billion dollars to settle the litigation.The Ohio State Teachers’ Retirement System agreed Friday to settle a lawsuit against Merrill, according to a Securities and Exchange Commission filing by Merrill — which was acquired by Bank of America Corp. on Jan. 1.
The retirement fund was the lead plaintiff in a lawsuit filed in U.S. District Court for the Southern District of New York. Class members include investors of Merrill’s shares from Oct. 17, 2006, to Dec. 31, 2008. In addition to Merrill, former chairman and chief executive officer Stanley O’Neal and three other senior executives were named as defendants, according to the complaint. The lawsuit accuses the defendants of making false and misleading statements about risky subprime CDO holdings. By misleading the public, senior management allegedly boosted their own compensation. The four officers named as defendants collectively earned $126 million in 2006. But by October 2007, Merrill warned it would take a $5 billion third-quarter charge for mortgage and credit problems, the plaintiffs claim. Later that month, the amount of charges was boosted to $8 billion. Shares of Merrill, which had traded as high as $95 in May 2007, traded around $11 a share at the end of December just prior to BoA’s acquisition. The deal reached with the plaintiffs calls for the former Wall Street giant to pay a $475 million cash settlement. The court must still give its blessing to the agreement. Upon payment, the case will be dismissed. Merrill also disclosed a proposed $75 million class action settlement in an action filed on behalf of the New York-based firm’s employees who used their retirement plans to invest in its stock from Sept. 30, 2006, to Dec. 31, 2008. “The claims in both cases focused primarily on Merrill Lynch’s subprime-related losses and related disclosures during the class periods,” Merrill said in the SEC filing. The investment banking firm didn’t admit to doing anything wrong in either case. Merrill noted it is still battling shareholder derivative actions and bondholder claims. Life Enrichment Foundation, Individually and On Behalf of All Others Similarly Situated, Plaintiff, vs. Merrill Lynch & Co. Inc., E. Stanley O’Neal, Ahmass L. Fakahany, Gregory J. Fleming and Jeffrey N. Edwards, Defendants. In re Merrill Lynch & Co. Inc. Securities, Derivative and ERISA Litigation. |
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