This is just the headache that beleaguered Bank of America CEO Ken Lewis needs…
It looks like B of A is facing legal woes as a result of its hastily arranged deal to buy Merrill Lynch last fall, and its subsequent statements about Merrill’s finances.
The Wall Street Journal reports (sub. req.):
Five public pension funds are seeking lead status in a class-action suit against Bank of America Corp., alleging that the nation’s largest bank by assets made “untrue statements” in the run-up to its purchase of Merrill Lynch & Co. and did not disclose material information to shareholders.The funds claim to have lost $274 million on their Bank of America investments between July 21, 2008 and Jan. 20, 2009.
Ohio Attorney General Richard Cordray said:
We believe that Bank of America executives had material information that raised serious reservations about the deal but they did not disclose this information to shareholders.
Merrill’s massive fourth quarter losses ultimately forced B of A to accept bailout funds in January, to help it digest Merrill. B of A execs have said (sub. req.) it wasn’t aware of those losses until shortly before it took formal control of Merrill. But Merrill has countered that B of A had full access to Merrill’s books far earlier.
Several other lawsuits have recently been filed against B of A. We’ve had a chance to look at one, brought as a class action by current or former B of A employees.
It alleges that B of A management — including Lewis, who is named as a defendant — didn’t divest empoyees’ 401k plans of their B of A stock, despite evidence that the stock was likely to decline in value thanks to the Merrill purchase. It accuses Lewis et al., among other things, of “making misrepresentations and failing to disclose information necessary for employees to protect their retirement savings.”