Anthony Saunders, a New York University finance professor hired by shareholders to assess Bank of America’s losses from the Merrill Lynch buyout, found the lender suffered at least $5.9 billion in damages from the deal.
Included in those damages was a $150 million settlement in 2010 with the U.S. Securities & Exchange Commission over executives’ misstatements about the Merrill Lynch purchase, Saunders said in his 50-page report.
Federal regulators alleged Bank of America officials misled investors about Merrill Lynch’s bonus payments before the 2009 acquisition and failed to disclose expected losses. The bank said in a November 2008 proxy statement that Merrill Lynch agreed not to pay year-end bonuses even though the bank had already backed Merrill’s plan to pay as much as $5.8 billion, according to the lawsuit.
“It is my expert opinion that the $150 million paid by BAC to the SEC in connection with the merger damaged BAC,” Saunders said.
In sworn testimony in the derivative case, Lewis acknowledged that Bank of America officials had input on ‘individual amounts’’ of bonuses paid to Merrill Lynch executives in December 2008 as the buyout moved toward completion.
Objectors to the board’s settlement of shareholders’ derivative claims are asking U.S. District Judge P. Kevin Castel to reject the $20 million accord and let them proceed with claims against Bank of America’s directors in state court in Delaware.
The Delaware investors want to press forward with their so- called derivative action, which would return any recovery from insurance covering directors to the bank’s coffers rather than to individual shareholders.
The New York case is In re Bank of America securities, derivative and employee retirement income securities act litigation, 09-02058, U.S. District Court, Southern District of New York (Manhattan.) The Delaware case is Rothbaum v. Lewis, CA4307, Delaware Chancery Court (Wilmington).