NEW YORK – Bank of America Corp on Friday won a federal judge's approval for a $2.43 billion settlement with investors who said the lender hid crucial information when it bought Merrill Lynch & Co.
The accord, among the largest investor settlements stemming from the recent global financial crisis, was approved by U.S. District Judge Kevin Castel in Manhattan.
Bank of America had agreed to buy Merrill in an all-stock deal initially valued at $50 billion on September 15, 2008, the same day that Lehman Brothers Holdings Inc went bankrupt.
But Merrill ended up losing $15.84 billion in that year's fourth quarter, even as it awarded $3.62 billion of bonuses to employees. Bank of America ultimately obtained a federal bailout, since repaid, to absorb Merrill.
Shareholders including the State Teachers Retirement System of Ohio and the Teachers Retirement System of Texas said Merrill's mounting losses and bonus plans should have been disclosed before investors voted on the merger in December 2008.
The accord with the second-largest U.S. bank was announced in September, and won preliminary court approval in December.
While the Charlotte, North Carolina-based lender denied the plaintiffs' allegations, Chief Executive Brian Moynihan has said the settlement would remove uncertainty for the company.
Since buying mortgage lender Countrywide Financial Corp in July 2008 and Merrill six months later, Bank of America has incurred more than $40 billion of extra costs for litigation, writedowns and mortgage buybacks, analysts have said.
The company still faces a variety of litigation over its mortgage operations, which have shrunk significantly in size, and over its underwriting of mortgage securities.
Bank of America is among 17 banks and lenders facing lawsuits by the Federal Housing Finance Agency over losses suffered by Fannie Mae and Freddie Mac on mortgage securities.
The FHFA has sued Bank of America over $57.5 billion of securities, more than any other bank, that Fannie Mae and Freddie Mac bought, and which were sponsored or underwritten by Bank of America, Countrywide or Merrill.
In late afternoon trading, Bank of America shares were up 3 cents at $11.97 on the New York Stock Exchange.
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 Bernard Vaughan; Additional reporting by Jonathan Stempel; Editing by Gary Hill and Dale Hudson)