A New York Federal District Court has “substantially denied” Bank of America Merrill Lynch’s motions to dismiss a September 2009 case filed by Ohio Attorney General Richard Cordray on behalf of five pension funds.
According to Judge P. Kevin Castel’s ruling, the Court approved the securities fraud and false proxy claims against the two companies and their respective management officials will be allowed to move forward.
Specifically, allegations that they failed to disclose the agreement to pay up to $5.8 billion in discretionary bonuses. Also, liability and false offering claims, as well as false proxy statement claims that BofA failed to disclose Merrill’s fourth quarter 2008 losses will be included in future deliberation.
Dismissed actions include securities fraud claims, which include allege that BofA failed to disclose Merrill’s previous 2008 losses, a Monday announcement said.
“The court’s ruling is a major win not only for Ohio teachers, public employees and all Bank of America shareholders, but it also is a win for shareholders of every company and for our financial system,” Cordray said in his comments. “The court ruled that companies cannot pick and choose what they will tell their shareholders. Companies will not be allowed to hide exorbitant bonuses and huge losses from their shareholders.
Cordray, the state watchdog, also explained in the Aug. 30 statement that he would “move forward move forward aggressively with this action to hold these companies and executives accountable” for the lead plaintiff group, which includes the State Teachers Retirement System of Ohio, the Ohio Public Employees Retirement System, the Teacher Retirement System of Texas and two European public pension funds.
Previously, last fall, the state Attorney General’s office announced the filing of the securities class action lawsuit against BofA, which alleged that statements made in 2008 by defendants regarding BofA’s merger with Merrill Lynch failed to disclose billions of dollars in known losses.
Additionally, roughly two months after its filing, District Court Judge Denny Chin granted a plaintiffs’ motion to “partially lift the ‘discovery stay’” in the shareholder suit. Alternately, in February, Cordray called BofA’s $150 million settlement with the Securities and Exchange Commission an “encouragement” for the group’s case against the financial services company.
With the recent news, court documents state that false proxy statement negligence against the new amalgamate will be a point of argument by the plaintiff group.
“He squarely rejected the defendants’ position that the lead plaintiffs must make a more stringent showing of ‘scienter’-- knowing or reckless intent to deceive or defraud,” Cordray said in reference to Castel’s order. “We are looking forward to developing evidence against the defendants under this negligence standard.”
In a Monday afternoon email, Bank of America Merrill Lynch Bill Halldin spokesperson declined comment on the suit.