Merrill Hit By Massachusetts Lawsuit

Massachusetts has filed a lawsuit against Merrill Lynch (MER Quote) alleging the bank committed fraud in selling esoteric debt securities to the city of Springfield.

The complaint, filed by the office of Massachusetts Secretary of the Commonwealth William Galvin, accuses Merrill of selling an investment that, although highly-rated, was unsuitable and unsafe from its own inventory of so-called collateralized debt obligations, or CDOs, via Merrill Lynch agents Carl Kipper of the investment bank's Albany, N.Y. office and Manuel Choy of Clifton Park, N.Y.

The city has lost some $13 million out of what was initially a $14 million investment in a trio of funky, mortgage-tainted paper, according to court documents. Springfield is aiming to recoup its losses and force Merrill to be stripped of any fees associated with the underwriting and sale of the debt. ...