CHARLOTTE, N.C. (
) -- The outcome of
Andrew Cuomo's case against
Bank of America
will have an impact beyond the New York Attorney General's office.
A cursory search of a federal district court
litigation Web site on Friday found more than three dozen pending cases that involved Bank of America and Merrill Lynch. (There were more than 500 that involved Bank of America alone.) The filings mostly pertained to pension funds and individuals who alleged that the firms accomplished their merger improperly, or were deceptive in peddling subprime securities.
Cuomo on Thursady accused Bank of America, as well as its former CEO Ken Lewis and former CFO Joe Price, of fraud. His office claims that management misled shareholders about Merrill's losses, should have informed them about planned bonus payments, and hoodwinked regulators into providing more cash to support the deal.
Any decision in the Cuomo matter that pins blame on B of A will weigh on the outcome of independent lawsuits as well.
"I am greatly encouraged by New York's recent suit against Bank of America, Mr. Lewis and Mr. Price," Ohio Attorney General Richard Cordray said in a statement on Friday.
Cordray teamed up with five pension funds last fall to file a class action suit against Bank of America, for largely the same reasons. He said Cuomo's allegations confirm the "purported egregious behavior" at the core of his case.
Bank of America's 2008 annual report outlined 14 merger-related cases against the company -- some of which have since been consolidated -- as well as seven merger-related cases against Lewis, et al. Those come in addition to a handful of separate suits over auction-rate securities and the sale and marketing of products that collapsed during the crisis.
Since then, B of A has settled some of those matters and sought to settle others. But it seems that litigation has largely been at a standstill, while Congress uncovered new information, and the outcome of more prominent cases, including Cuomo's, are determined. Within days of disclosing Merrill's enormous fourth-quarter losses, in January 2009, shareholders were rushing to court. Other than consolidating their efforts into class-action suits, not much has happened in their courtrooms since then.
Congressional hearings have provided some stunning revelations over the past year, though none that materially benefited the case against B of A. In fact, disclosures that top officials influenced the Merrill deal's outcome seems to have taken some of the burden off of Lewis & Co. The
Securities and Exchange Commission
filed a revised $150 million settlement with Bank of America on Thursday. The regulator determined it was unable to charge individuals, and apparently had insufficient evidence to prove that B of A was guilty of any crime.
Given the lack of direct evidence that the company and its executives had malicious intent to dupe shareholders and regulators, Cuomo may decide to settle as well. If he does so without Bank of America admitting to any wrongdoing, plaintiffs will have less ammo for a big-ticket judgment. In that case, the bank may be able to resolve those disputes with small settlements, rather than dragging it out in court.
There's no telling how long it may take to resolve all Merrill-related litigation, though. Bank of America is still enmeshed in litigation dating back to 2001, related to employees of a subsidiary of FleetBoston, which it acquired six years ago. A class-action suit related to California retirees' Social Security payments was first filed against a subsidiary on Aug. 13, 1998, and is still working its way through appeals courts. Bank of America is also now involved in a decade-old legal dispute of Merrill's, tied to defaulted payments on an "Italian library of movies" by a bankrupted company called Mediafiction SpA.
Even Enron remains on the docket.
"Parties are currently awaiting the District Court's decision" on motions to dismiss a major class-action suit in Enron's home state of Texas. More than a dozen other actions have been brought, but "there has been no adjudication of the merits of these claims."
-- Written by Lauren Tara LaCapra in New York