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Public pension funds get share of BofA’s record $16.65 billion settlement

Bank of America Corp.

Several state pension funds are among the recipients of Bank of America Corp.’s $16.65 billion in fines and consumer relief to end federal and state probes into mortgage bond sales, the harshest penalty yet related to loans that fueled the 2008 financial crisis, the Justice Department said.

The settlement, which includes $7 billion in consumer relief and $9.65 billion in cash, resolves civil investigations by federal and state prosecutors, the U.S. said Thursday.

“This constitutes the largest civil settlement with a single entity in history, addressing conduct uncovered in more than a dozen cases and investigations,” Attorney General Eric Holder said at a news conference in Washington on Thursday.

California will receive $300 million in damages, which will reimburse the $298.6 billion California Public Employees’ Retirement System, Sacramento, and $186.6 billion California State Teachers’ Retirement System, West Sacramento, said Kamala D. Harris, state attorney general, in a statement. The state will also receive at least $500 million in consumer relief.

CalPERS said in a news release it will receive up to $250 million from Bank of America, boosting the total recovery on losses sustained from investments in mortgage-backed securities to more than $500 million.

Illinois Attorney General Lisa Madigan announced in a statement that Illinois’ pension funds will receive $200 million — $154.2 million to the $44.2 billion Illinois Teachers’ Retirement System, Springfield; $43.2 million to the $14.6 billion Illinois State Board of Investment, Chicago, which oversees the State Employees’ Retirement System, General Assembly Retirement System and Judges’ Retirement System; and $2.6 million to the $16.9 billion Illinois State Universities Retirement System, Champaign. The state is also receiving $100 million in consumer relief.

Maryland Attorney General Douglas F. Gansler announced in a statement that Maryland will share an estimated $75 million among its pension funds and government entities.

Kentucky Attorney General Jack Conway said in a statement that the $15.5 billion Kentucky Retirement Systems, Frankfort, will receive $23 million from the settlement.

New York is receiving $300 million in cash, and a minimum of $500 million worth of consumer relief, said state Attorney General Eric Schneiderman in a statement. The statement did not specify how much would specifically go to the state’s pension funds.

The agreement cements Bank of America’s status as the firm punished hardest for faulty mortgage practices. It eclipses Citigroup Inc.’s $7 billion settlement in July and J.P. Morgan Chase & Co.’s $13 billion accord in November. Bank of America’s settlement also comes on top of its $9.5 billion deal in March to resolve related Federal Housing Finance Agency claims.

Bloomberg contributed to this story.