Published January 11, 2013
Bank of America Corp directors have reached a $62.5 million settlement to resolve investor claims over the bank's acquisition of Merrill Lynch & Co, a person familiar with the matter said, after a federal judge expressed reservations about an earlier version of the accord.
U.S. District Judge Kevin Castel in Manhattan on Friday agreed to increase the size of the settlement from $20 million, the person said.
This came after Castel had indicated in a January 4 order that he had yet to be persuaded of the fairness of the settlement, which also includes governance reforms.
Castel also suggested in that order that "some, most or all" of the $20 million cash payout would have been consumed by attorney's fees for the plaintiffs.
The accord is separate from a $2.4 billion settlement that the Charlotte, North Carolina-based lender reached in September to resolve securities fraud litigation over the Merrill takeover.
Bank of America said in a statement about Friday's developments: "We support the terms of the settlement, and are gratified that the matter has been resolved."
The case was led by two pension funds, the Louisiana Municipal Police Employees' Retirement System and the Hollywood Police Officers' Retirement System in Florida.
Albert Myers and Joseph White, who represent the pension funds, did not immediately respond to requests for comment.
The settlement resolved claims that Bank of America directors including former Chief Executive Kenneth Lewis misled shareholders about Merrill's losses, which peaked at $15.84 billion in the fourth quarter of 2008, and that Merrill was paying $3.6 billion of bonuses at the time.
Payouts would go to the bank, not to shareholders. Directors of publicly-traded companies typically have liability insurance to cover a variety of payouts in derivative lawsuits.
The case is: In re: Bank of America Corp Securities, Derivative, and Employee Retirement Income Security Act (ERISA) Litigation, U.S. District Court, Southern District of New York, No. 09-md-02058.
(Reporting by Jonathan Stempel in New York; editing by Carol Bishopric)