Ohio Attorney General Richard Cordray said Monday his office is heading a securities class action lawsuit against Bank of America’s $50 billion acquisition of Merrill Lynch, which was announced on September 15, 2008, and also some executives, including Bank of America (NYSE:BAC) Chief Executive Ken Lewis, over the two companies’ merger earlier this year.
The complaint, filed on behalf of five pension funds: The State Teachers Retirement System of Ohio; the Ohio Public Employees Retirement System; the Teacher Retirement System of Texas; Stichting Pensioenfonds Zorg en Welzijn, represented by PGGM Vermogensbeheer B.V.; and Fjärde AP-Fonden, alleges that statements made in 2008 by some executives regarding BofA’s merger with Merrill, failed to disclose billions of dollars in known losses at Merrill Lynch and Bank of America.
The lawsuit also alleges that BofA, during merger negotiations, agreed to allow Merrill Lynch to pay up to $5.8 billion in discretionary year-end bonuses to its executives and employees, but failed to disclose that material information important to shareholders.
“They were concealing billions of dollars in losses with one hand and clearing the way for extravagant bonus payments with the other,” said Attorney General Cordray. “This case gives the public pension funds and other shareholders a chance to stand up against Wall Street.”
The lawsuit also targets Joe Price, Bank of America’s chief financial officer, as well as Neil Cotty, the bank’s chief accounting officer.
Mr. Cordray said the lawsuit could eventually seek “billions” in damages, and that he will seek the damages from the bank and executives alike.
It will be interesting to see how many civil lawsuits it’s gonna take for Ken Lewis to finally get the message that shareholders are not particularly crazy with the way he handled the whole Merrill deal.
View the class action complaint