CHARLOTTE, N.C. (Legal Newsline) - Bank of America says it has settled a class action lawsuit brought against the company over its acquisition of Merrill Lynch.
Bank of America previously reached a $150 million settlement with the Securities and Exchange Commission, but the class action settlement will prove much more costly. The proposed settlement, subject to court approval, would pay a total of $2.43 billion.
Resolving this litigation removes uncertainty and risk and is in the best interests of our shareholders," Chief Executive Officer Brian Moynihan said. "As we work to put these long-standing issues behind us, our primary focus is on the future and serving our customers and clients."
Bank of America allegedly misled investors in the months leading up to its 2008 purchase of Merrill Lynch. It was alleged that it withheld Merrill Lynch's heavy fourth quarter losses before a shareholder vote on the purchase.
It also allegedly withheld Merrill Lynch's plan to spend up to $5.8 billion in executive bonuses after the merger.
Lead counsel in the class action included the firms Bernstein Litowitz Berger & Grossman and Topaz Kessler Meltzer & Check. The settlement will need to be approved by Judge Kevin Castel of the U.S. District Court for the Southern District of New York.
The bank says the litigation expense, improvements in credit spreads and a tax charge will decrease third-quarter earnings per share by 28 cents.
In August 2010, Castel dismissed claims relating to the alleged failure of Bank of America to disclose Merrill Lynch's 2008 losses.
The lead plaintiff group includes two Ohio public pension funds, the Teacher Retirement System of Texas and two European public pension funds.
It was former Ohio Attorney General Richard Cordray who initiated the funds' involvement in the case. He is now the head of the federal Consumer Financial Protection Bureau. Kaplan Fox & Kilsheimer represented the Ohio funds.
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