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BofA, execs owe ‘billions’ in lawsuit, Ohio says

Investors in a class-action lawsuit against Bank of America over the Merrill Lynch takeover are trying to collect "billions of dollars" in damages, Ohio's attorney general said.
/ Source: Reuters

Investors in a class-action lawsuit against Bank of America Corp. over the Merrill Lynch & Co. takeover are trying to collect "billions of dollars" in damages, Ohio's attorney general said on Monday.

Attorney General Richard Cordray spoke after filing a 155-page complaint in Manhattan federal court that accuses Bank of America of fraudulently concealing Merrill's soaring losses even as it let Merrill award $3.6 billion of bonuses in 2008.

Cordray is leading the case on behalf of five pension funds. Investors also want to recover from Bank of America Chief Executive Kenneth Lewis, Chief Financial Officer Joe Price, Chief Accounting Officer Neil Cotty, the bank's board of directors, and former Merrill chief executive John Thain.

"The amount of shareholder value affected here, negatively, is about as great as has been alleged in any case, ever," Cordray said in a press conference. He said damages "could well be in the billions of dollars," and that the investors are "not looking immediately to settle."

Bank of America spokeswoman Shirley Norton said: "We are confident we disclosed all that was required and look forward to presenting our position to the court."

Through Friday, Bank of America shares had fallen 51 percent since the merger was announced on September 15, 2008. The shares were up 1.3 percent to $16.82 in afternoon trading.

U.S. District Judge Denny Chin had on July 1 granted lead plaintiff status in the case to two pension funds in Ohio, and one each in Texas, the Netherlands and Sweden.

A lead plaintiff helps direct litigation and is typically a large shareholder who represents other shareholder plaintiffs.

The amended complaint was filed late Friday, hours after Bank of America formally denied U.S. Securities and Exchange Commission claims accusing it of misleading shareholders about the bonuses. U.S. District Judge Jed Rakoff had rejected the bank's $33 million settlement with the SEC over the awards.

Congress is also investigating the merger.

Cordray defended his effort to recover from Thain, whom some believe helped keep Merrill from collapsing by agreeing to merge, on the same morning that Lehman Brothers Holdings Inc. went bankrupt.

"In the long-term, violating the law is not something that anybody should be cheering for, rooting for, even if they gain some short-term advantage," he said.

Jesse Derris, a spokesman for Thain, declined to comment.