Bank of America to Pay $2.43 Billion in Settlement
Bank of America said it has agreed to pay $2.43 billion to settle a class-action lawsuit related to its acquisition of Merrill Lynch.
The lawsuit was filed on behalf of investors that bought or held Bank of America stock when the company announced its plans to buy Merrill Lynch as the banking industry and federal government struggled to contain fallout from the financial crisis in the fall of 2008.
Among the plaintiffs allegations was that Bank of America and some of its officers made false or misleading statements about both companies' financial health.
In announcing the proposed settlement on Friday, Bank of America denied the allegations and says it agreed to the settlement to get rid of the uncertainties, burden and costs related to the lawsuit.
"As we work to put these long-standing issues behind us, our primary focus is on the future and serving our customers and clients," Bank of America CEO Brian Moynihan said in a statement.
The settlement still needs court approval and will be reviewed by Judge Kevin Castel in the United States District Court for the Southern District of New York.
As part of the settlement, the bank has also agreed to adopt several corporate governance policies until Jan. 1, 2015. These policies include those related to majority voting in board member elections, annual disclosure of noncompliance with stock ownership guidelines, policies for a board committee regarding future acquisitions, the independence of the board's compensation committee and its compensation consultants and conducting an annual "say-on-pay" vote by shareholders.
The bank said Friday that it will pay for the settlement with existing litigation reserves and about $1.6 billion in litigation expense that will be recorded in its third quarter. The company cautioned that this expense, coupled with some other charges, is expected to lower its third-quarter earnings by about 28 cents per share.
Bank of America will report its third-quarter financial results on Oct. 17.