Ohio Sues Bank Of America
MICHELE NORRIS, host:
One year after the Wall Street meltdown, Bank of America is still facing problems associated with its speedy takeover of Merrill Lynch. The latest is that Ohio's attorney general has filed a class action lawsuit. It's on behalf of the state's public pension plans and Ohioans who say they lost serious money.
From Ohio Public Radio, Jo Ingles reports.
JO INGLES: Last year about this time, all eyes were on a jittery Wall Street. The country's financial leaders hoped Bank of America would follow through with its plan to acquire the embattled brokerage firm Merrill Lynch. That happened, but Bank of America shareholders, like Aristotle Hutras of Columbus, Ohio, say they lost money as a result.
Mr. ARISTOTLE HUTRAS: I'm pretty angry, and I do think the anger is justified.
INGLES: Hutras is not just one of thousands of Ohioans invested in the state's pension plans, he is a state employee in charge of a board working on ways to shore up those funds for future retirees. Hutras is angry that the state's two largest funds lost tens of millions of dollars in Bank of America stock after the deal.
Mr. HUTRAS: They had information and didn't share it with the public plans. And had the public plans and any other investor known the facts, the results would've been different because they probably wouldn't have invested the money and wouldn't be out the loss.
INGLES: That's the crux of a class action lawsuit filed by Ohio Attorney General Richard Cordray on behalf of the state's pension plans. He accuses Bank of America officials of misleading investors by withholding important information prior to and during the acquisition of Merrill Lynch. Cordray also slams the bank for paying millions of dollars in bonuses to Merrill Lynch executives.
Mr. RICHARD CORDRAY (Attorney General, Ohio): The Wall Street executives here and the people running these companies, we believe, you know, engaged in greedy, shoddy, self-serving practices.
INGLES: On October 6th of last year, one share of Bank of America stock sold for more $32. In March, two months after the merger, the same share was worth about $3. It now hovers around $17 a share.
Scott Pattison heads the National Association of State Budget Officers. He says other states are watching this case closely.
Mr. SCOTT PATTISON (Executive Director, National Association of State Budget Officers): Certainly if Ohio is successful, I think that you'll see a lot of other states and localities look to what kind of other legal remedies that they might have.
INGLES: But Richard Bove, who's with the firm Rochdale Securities, takes issue with the claims that Bank of America stock lost value because the company failed to properly disclose information to shareholders.
Mr. RICHARD BOVE (Rochdale Securities): I have a lot of trouble believing that it's true.
INGLES: Bove says the bank did what was necessary to make the dicey merger happen smoothly.
Mr. BOVE: As a result of what Bank of America did, tens of thousands of people still have their jobs, are still operating out of New York and are still being paid reasonable incomes.
INGLES: In a written statement, Bank of America says it's confident that it disclosed all that was required and looks forward to presenting its position to the court.
But Ohio State University law professor Paul Rose thinks Bank of America will be motivated to eventually settle this suit. And he thinks that's probably what Ohio wants too.
Professor PAUL ROSE (Law, Ohio State University): Settlements are actually higher when you have public pension funds involved in a securities class action lawsuit. Furthermore, since again, they are often still invested in the company while they're bringing a suit for the sale of some of their shares, they often are not trying to bring the company down by any means. So, you'll see a settlement often coupled with some sort of corporate governance change or something that they feel is really important.
INGLES: For NPR News, I'm Jo Ingles in Columbus, Ohio.