Bank of America has agreed to a settlement for a class-action lawsuit related to its acquisition of Merrill Lynch during the height of the financial crisis, which will result in the big bank paying out $2.43 billion.
Shareholders alleged in the lawsuit that Bank of America and some of its officers did not tell the truth about either company’s financial health, reports Yahoo! Finance. Instead, the shareholders stated that the bank made false or misleading information about the companies.
Investors who bought or held Bank of America stocks with the company announced its intent to purchase Merrill Lynch in a deal that costed $20 billion were involved in the lawsuit. The purchase took place just as the banking industry and federal regulators were struggling to contain the financial crisis in 2008.
The deal between Bank of America and Merrill Lynch was made on the same weekend in September that Lehman Brothers collapsed. It later came into question when the bank disclosed that Merrill would pose $27.6 billion in losses for 2008.
The purchase significantly added to Bank of America’s financial problems, causing the company to ask for a $20 billion bailout from the government to help offset losses — on top of the $25 billion the bank already received.
The bank denied the shareholders’ allegations during the settlement, but agreed to it in order to get rid of certainties, burden, and the cost related to the lawsuit, notes The New York Times. Bank of America CEO Brian Moynihan stated:
“As we work to put these long-standing issues behind us, our primary focus is on the future and serving our customers and clients.”
This is not the first settlement for Bank of America in 2012 as they, along with four other banks, agreed to a $26 billion settlement regarding their foreclosure practices.