New York has sued Bank of America Corp and its Merrill Lynch & Co unit over the companies' merger and Merrill's subprime mortgage exposure, hoping to recover more by suing on its own than by joining existing class-action litigation.
State Comptroller Thomas DiNapoli filed two lawsuits on Thursday in the U.S. district court in Manhattan to recover losses suffered by the $132.5 billion New York State Common Retirement Fund, which he oversees.
Defendants include onetime Bank of America Chief Executive Kenneth Lewis and Chief Financial Officer Joe Price, and former Merrill Chief Executive Stanley O'Neal.
DiNapoli filed the lawsuits after choosing to opt out of 2007 shareholder litigation against Merrill and 2009 litigation against Bank of America, the largest U.S. bank by assets.
Our attorneys believe this gives us a chance to get a better recovery, perhaps reaching tens of millions of dollars, spokesman Robert Whalen said in an interview.
The Common Fund owned 3.06 million Bank of America shares and 4.83 million Merrill shares, court records show.
Bill Halldin, a spokesman for Charlotte, North Carolina-based Bank of America, declined to comment.
One complaint accuses Bank of America of misleading shareholders about Merrill's losses as it prepared to buy the Wall Street bank in late 2008. The other accuses Merrill of misleading shareholders about its risk management and exposures to mortgage securities and collateralized debt obligations.
These companies thought they could get away with profiting at the expense of New York's pensioners and taxpayers through fraudulent activities and misleading public disclosures, DiNapoli said in a statement. They were mistaken.
Bank of America agreed to buy Merrill on September 15, 2008. Merrill lost $15.8 billion in the fourth quarter of that year, even as it paid out $3.6 billion of bonuses. The merger was completed on January 1, 2009.
In February, U.S. District Judge Jed Rakoff accepted Bank of America's $150 million settlement of U.S. Securities and Exchange Commission charges that it misled shareholders about the merger, an accord he called half-baked justice at best.
New York Attorney General Andrew Cuomo has separately filed civil fraud charges against Bank of America, Lewis and Price.
DiNapoli is running for reelection as comptroller in November. Cuomo is running for governor. Both are Democrats.
Bank of America shares were up 34 cents, or 2.5 percent, at $13.70 in afternoon trading on the New York Stock Exchange.
The cases are DiNapoli v. Merrill Lynch & Co et al, U.S. District Court, Southern District of New York, No. 10-05562, and DiNapoli v. Bank of America Corp et al in the same court, No. 10-05563.
(Reporting by Jonathan Stempel; Additional reporting by Grant McCool in New York and Joe Rauch in Charlotte, N.C., editing by Gerald E. McCormick and Robert MacMillan)