NEW YORK (Legal Newsline) - Plaintiffs in a class action lawsuit against Bank of America have filed their consolidated amended complaint, alleging the company withheld information from investors about its merger with Merrill Lynch.
Two Ohio pension funds and a Texas pension fund are among the five lead plaintiffs appointed by the U.S. District Court for the Southern District of New York. Their complaint was filed Friday, and it charges that the company did not disclose billions of dollars in losses by Merrill Lynch or Lynch's plan to give billions in executive bonuses after the January merger.
Though he is not representing the Ohio State Teachers Retirement System or the Ohio Public Employees Retirement System, Ohio Attorney General Richard Cordray says it gives shareholders "a chance to stand up against Wall Street."
Kaplan Fox & Kilsheimer of New York is representing the Ohio funds and the Teachers Retirement System of Texas.
New York Attorney General Andrew Cuomo has been probing the same allegations but has yet to file any charges.
The class action suit says Bank of America agreed to allow Merrill Lynch to pay up to $5.8 billion in executive bonuses after the merger but did not tell its shareholders. Merrill Lynch ended up paying out $3.6 billion in executive bonuses.
Also, Bank of America did not warn its shareholders of Merrill Lynch's heavy losses during the fourth quarter of 2008, though Bank of America's executives knew of them, the complaint said.
After a shareholder vote, Bank of America continued to withhold the information, the complaint said.
Cuomo wrote Bank of America to tell it he is frustrated with the company's invocation of attorney-client privilege during his investigation.
"The facts of the cascading losses and bonus payments -and the facts of Bank of America's senior executives' knowledge of these events - are straightforward," the letter written by Cuomo's Consumer Investor Protection Bureau chief David Markowitz says.
"However, as discussed in detail below, the decision-making process by which Bank of America and its executives decided not to disclose these material facts to Bank of America's shareholders has been hidden from our investigation by Bank of America's repeated invocation of the attorneyclient privilege.
"These invocations have been made even though Bank of America has offered reliance on legal advice as a justification for each of its failures to disclose."
Bank of America said it was disappointed by Cuomo's letter.
"We were extremely surprised and disappointed by the letter for several reasons," the company's attorneys wrote in the letter, obtained by The New York Times.
"We do not understand your office's apparent refusal to meet with Bank of America's counsel and to hear Bank of America and Merrill Lynch's side of the story, including why there is no basis for seeking to invade the attorney-client privilege here.
"(T)he basic premise of the letter is simply wrong. Bank of America has not put at issue the subject matter of any advice of counsel. Nor has Bank of America offered reliance on legal advice as a justificiation for its disclosures."
From Legal Newsline: Reach John O'Brien by e-mail at firstname.lastname@example.org.