Pensions to Collect on BoA's $2.43 Billion Settlement

Eleven public pension funds, including CalPERS and Texas Teachers', were active participants in the lawsuit Bank of America has settled for $2.43 billion.

(September 28, 2012) – Bank of America has settled a class action lawsuit for $2.43 billion, a chunk of which will go to public pension funds who invested in the bank around the time it acquired Merrill Lynch. 

Ohio’s teachers’ retirement system and public employee pension were among the case’s lead plaintiffs, and will likely receive about $9.7 million and $11.8 million respectively, according to the Columbus Dispatch. The exact amount depends on how many claims are filed—an estimated 70,000 investors are eligible for a slice of the settlement. 

Nine other public pension funds were actively involved in the lawsuit: the Teachers Retirement System of Texas, California Public Employees’ Retirement System, New York State Teachers’ Retirement System, Louisiana Municipal Police Employees Retirement System, Public Employees’ Retirement Association of Colorado, West Palm Beach Police Pension Fund, Westmoreland County Employee Retirement System, Hollywood Police Officers’ Retirement System, and European fund ABP

The suit, which was filed in 2009, accused Bank of America and Merrill of unlawfully covering up Merrill’s $15.3 billion in losses from the fourth quarter of 2008. 

“Under the weight of Merrill’s undisclosed losses,” the complaint asserted, the merger between the two firms “was only salvaged through a $138 billion taxpayer bailout, consisting of an emergency infusion of more than $20 billion in government capital and $118 billion in asset guarantees. This funding was in direct contrast to BOA’s statements before the Merger that the company did not need government assistance…. Plaintiffs suffered substantial damages as a result of defendants’ material misrepresentations and omissions in connection with the merger.” 

Furthermore, the complaint accuses Bank of America of secretly permitting the hemorrhaging Merrill Lynch to pay out $5.8 billion in employee bonuses before the merger’s closing date. 

“In celebrating the closing of the merger on January 1, 2009,” the complaint alleged, the “defendants made materially false and misleading statements and omissions of material fact by claiming, among other things, that the transaction ‘uniquely positioned [BOA] to win market share and expand [BOA’s] leadership position in markets around the world.’” As Bank of America gradually disclosed the scale of Merrill’s losses and tempered expectations of its own performance, the bank’s shares dropped precipitously, according to the suit. Between September 12 2008, the day before the merger was announced, to January 22 2009, when Merrill’s bonus payments came to light, Bank of America’s stock declined in value by $28.03 per share. 

The $2.43 billion settlement is the fourth-largest ever for a securities class action against a single defendant, and the largest for cases involving no account fraud or criminal convictions. 

“Resolving this litigation removes uncertainty and risk and is in the best interests of our shareholders,” said Brian Moynihan, Bank of America’s chief executive officer, in a statement. “As we work to put these long-standing issues behind us, our primary focus is on the future and serving our customers and clients.”