A New York judge has approved Bank of America's $2.43 billion settlement of a class action lawsuit brought by shareholders over the company's acquisition of former competitor Merrill Lynch.
A judge for the U.S. District Court for the Southern District of Manhattan approved the settlement Friday. The bank proposed the settlement in late September. The agreement resolves allegations that Bank of America did not disclose the state of its finances or those of Merrill Lynch when it agreed to buy Merrill in September 2008.
Judge Kevin Castel said the settlement was "hard fought," but called the final deal was "fair, reasonable and adequate."
"We are pleased that this matter has been resolved," said Bank of America spokesman Lawrence Grayson. A call seeking comment from the State Teachers Retirement System of Ohio, one of the plaintiffs in the case, was not immediately returned.
Bank of America said in September that it rejected the allegations and was agreeing to the settlement to end the uncertainties, burden and costs associated with the lawsuit.
The Charlotte, N.C., company agreed to buy Merrill Lynch for $20 billion in stock at the height of the financial crisis. The deal was struck the same weekend that Lehman Brothers collapsed. Bank of America later disclosed that Merrill Lynch was going to take $27.6 billion in losses that year. Bank of America later asked for a $20 billion bailout from the federal government to help counteract those losses. It had already received $25 billion in bailout funds.
The Securities and Exchange Commission won a $150 million settlement from Bank of America in 2009 to resolve charges the company misled shareholders about the acquisition. The SEC said Bank of America failed to tell shareholders it had authorized Merrill to pay as much as $5.8 billion in bonuses to its employees in 2008 before shareholders voted on the acquisition. The deal closed in early 2009.
Bank of America still faces a civil fraud lawsuit that accuses the company and former CEO Kenneth Lewis of failing to disclose the Merrill losses and bonuses before the acquisition closed. The lawsuit was filed by then- New York Attorney General Andrew Cuomo in February 2010, and it is being pursued by AG Eric Schneiderman. The company says those charges are unfounded.