The New Jersey Division of Investment, Trenton, bought $300 million in preferred Merrill Lynch stock in early 2008 “based on misleading information” from the firm about its financial condition, according to a lawsuit filed Tuesday by New Jersey Attorney General Anne Milgram.
Merrill Lynch “repeatedly misrepresented its financial position” to the $63.2 billion Division of Investment, which agreed to buy the convertible stock in January 2008, according to the complaint, filed in state Superior Court in Hudson County, Jersey City.
Merrill Lynch originally had agreed to pay the state a 9% dividend, but in July 2008, the Division of Investment accepted a new agreement from Merrill, in which the state would no longer receive the dividend and would receive 11 million shares of common stock at an exchange ratio of $27.68.
“If the division had known Merrill's true financial condition,” the complaint said, “it would not have participated in the January 2008 offering and would not have agreed to a conversion in July 2008 that gave up antidilution reset rights.”
The Division of Investment is seeking compensatory damages, according to the complaint.
The complaint also names as a defendant Bank of America, which acquired Merrill Lynch on Jan. 1, as “a successor entity.”
A representative from Merrill Lynch was not available for comment; Bank of America spokeswoman Shirley Norton declined to comment.