New York State Common Retirement Fund, Albany, will receive $4.25 million from Bank of America to settle a securities fraud lawsuit filed by the $132.8 billion fund against Merrill Lynch and two former company officials, confirmed Olayinka Fadahunsi, spokesman for Thomas P. DiNapoli, New York state comptroller and the fund's sole trustee.
E. Stanley O'Neal, Merrill Lynch's former CEO, and Jeffrey N. Edwards, the company's former vice chairman, also were named in the suit and were part of the settlement. Bank of America acquired Merrill Lynch in 2008.
According to court documents filed in July in U.S. District Court in New York, the fund alleged Merrill Lynch and its former executives did not disclose the full extent of the company's involvement in and exposure to subprime mortgage-backed securities and as a result, artificially inflated the company's share price. When the real exposure to risky subprime MBS became known, Merrill Lynch's share price dropped and caused losses to investors like the New York fund, the court document claimed.
“The fund was misled about the extent of Merrill Lynch's participation in the subprime mortgage fiasco; that is unacceptable,” Mr. DiNapoli said in a news release.
Shirley Norton, a Bank of America spokeswoman, confirmed the $4.25 million settlement, but said the company declined to comment further.
Neither Mr. O'Neal's attorney, Michael J. Chepiga, a partner at Simpson Thacher & Bartlett, nor Mr. Edwards' attorney, Antonio Yanez Jr., a partner at Willkie Farr & Gallagher, returned calls seeking comment.