A group of leading global pension fund investors have announced a $2.4bn (€1.9bn) recovery in their long-running class action against Bank of America.
The case relates to the bank’s controversial acquisition of brokerage giant Merrill Lynch at the height of the financial crisis in 2008/9.
The lead plaintiffs in the case include PGGM, the Dutch health and social care pension fund, Swedish state fund Fjärde AP-Fonden (AP4), the State Teachers Retirement System of Ohio, the Ohio Public Employees Retirement System and the Teacher Retirement System of Texas.
The bank has agreed to pay the cash – and to implement what are termed “significant corporate governance improvements” – to resolve the four-year-old case which had been set to go to trial on October 22.
“We believe the settlement represents a landmark recovery for shareholders who voted on the acquisition without complete and accurate information,” said Eloy Lindeijer, Chief Investment Officer at PGGM Investments.
“The settlement sends a strong message to all companies concerning the paramount importance of conducting a fully-informed shareholder vote on corporate acquisitions and mergers.”
The funds had alleged that Bank of America, Merrill and various executives and directors violated securities lawsby making a series of false statements and omissions in connection with the multi-billion-dollar deal.
The settlement is believed to be the single largest class action settlement ever resolving a so-called Section 14(a) claim – the federal securities provision designed to protect investors against misstatements in connection with a proxy solicitation.
“The settlement sends a strong message to all companies”
It’s also one of the four largest settlement amounts ever funded by a single corporate defendant for violating US securities laws. It’s also the biggest in which there was no financial restatement or criminal convictions related to the alleged misconduct.
“Resolving this litigation removes uncertainty and risk and is in the best interests of our shareholders,” said Bank of America CEO Brian Moynihan in a statement.
The settlement will be on top of the $150m recovered by the Securities and Exchange Commission from the bank on the same issue.
The pension funds were represented by law firms Bernstein Litowitz Berger & Grossmann, Kaplan Fox & Kilsheimer and Kessler Topaz Meltzer & Check.