US - The New York State Common Retirement Fund has agreed a $4.25m settlement in a securities fraud law suit against Merrill Lynch.
The fund negotiated the final settlement with Bank of America, which purchased Merrill Lynch and opted out of a similar class action suit, expecting to recover substantially more in damages than the amount expected as part of the class.
"The fund was misled about the extent of Merrill Lynch's participation in the subprime mortgage fiasco; that is unacceptable," said State Comptroller Thomas P. DiNapoli (pictured), trustee of the $132.8bn state and local employee retirement fund, the third-largest in the US.
"I am responsible for protecting the secure retirement of more than one million system members, and I take that duty seriously. I am confident that this settlement makes up for a large part of the fund's losses. This sends a message that we will always fight to protect the best interests of our members."
DiNapoli's office alleged that the defendants - who also included Merrill Lynch officials E. Stanley O'Neal and Jeffrey N. Edwards - tried to cover up the extent of the company's involvement in risky subprime mortgage-backed securities. In doing so, the defendants artificially inflated the value of their stock and when the true extent of their exposure became public, the stock value plummeted and investors lost money, DiNapoli claimed. The law firm of Entwistle & Cappucci negotiated the settlement.
The fund filed the suit in the United State District Court for the Southern District of New York in July. It also filed a separate but related action seeking to recover losses incurred as the result of the merger between Bank of America and Merrill Lynch.
DiNapoli's office and the New York City pension funds recently negotiated a $624 million settlement in a class-action securities fraud suit against Countrywide Financial Corporation in May. If approved by the court, it will be one of the largest securities fraud class action settlements in history.
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