Earlier this month, Bank of America (BofA) announced a $2.43 billion settlement of a securities lawsuit related to alleged misleading statements arising out of its 2008 acquisition of Merrill Lynch. BofA was accused by institutional plaintiffs of misleading shareholders about the health of Merrill Lynch at the time it was acquired, and specifically Merrill Lynch’s losses as the credit crunch deepened. BofA denied the allegations, but agreed to settle to resolve ongoing litigation uncertainty. The settlement was far larger than analysts had anticipated and represents the largest securities lawsuit settlement arising out of the credit crunch. It is reportedly surpassed in size only by settlements arising out of the Enron, WorldCom, Tyco and Cendant scandals.
The civil settlement may have an impact on other pending regulatory claims against BofA, in particular, the New York Attorney General’s lawsuit against BofA and its executives for misleading investors about Merrill Lynch’s losses. The securities settlement likely means that the attorney general can no longer seek to recover for shareholder losses, but may still seek a penalty against the bank. (“Bank of America Settles Suit Over Merrill for $2.43 Billion,” New York Times, September 28, 2012).