* Directors say shareholders have no right to intervene
* Shareholders call $20 mln accord grossly inadequate
* Delaware plaintiffs say to file response on May 4
By Jonathan Stempel
April 30 (Reuters) – Bank of America Corp directors
rejected allegations by unhappy shareholders that their proposed
$20 million settlement of litigation over the purchase of
Merrill Lynch & Co was made “on the cheap” and was the product
of collusion.
The accord would resolve a New York lawsuit claiming the
bank’s board, including former Chief Executive Officer Kenneth
Lewis, had hidden how Merrill was headed toward an eventual
$15.84 billion quarterly loss, even as it was paying $3.6
billion of bonuses.
The settlement also called for governance changes, including
the creation of a board-level committee of independent bank
directors to assess major new transactions, court papers show.
Bank of America did not reveal the scope of Merrill’s losses
until after shareholders approved the merger in December 2008.
In a Friday night filing in the U.S. District Court in
Manhattan, directors said the objecting shareholders had no
authority to block the settlement, which the shareholders fear
would wipe out their claims in a similar lawsuit in Delaware.
The directors said the shareholders had waited an
“inexcusably” long three years to get involved in the case and
called their $5 billion damages claim “outrageous.”
The directors also said there was “nothing collusive” about
settlement talks.
“At bottom, the Delaware plaintiffs’ arguments amount to
nothing more than a dressed-up objection to the adequacy of the
proposed settlement,” the directors said.
“The Delaware plaintiffs have shown no grounds for (an
injunction), nor demonstrated that they will be irreparably
harmed by this court’s consideration of the proposed
settlement,” the directors added.
U.S. District Judge Kevin Castel in Manhattan will decide
whether to approve the settlement.
Lead plaintiffs in the New York case supported the
directors’ request. These plaintiffs are the Hollywood (Florida)
Police Officers’ Retirement System and the Louisiana Municipal
Police Employees’ Retirement System.
In a Monday court filing, Michael Schwartz, a lawyer for the
Delaware shareholders, said his clients will respond on May 4,
as the judge had directed. Schwartz was not immediately
available for further comment.
The Delaware shareholders have called the proposed payout
“grossly inadequate,” saying it represented just 4 percent of
the directors’ $500 million in insurance coverage.
Both cases are derivative lawsuits brought on behalf of Bank
of America. Payouts would go to the Charlotte, North
Carolina-based lender rather than to shareholders.
Castel also oversees nationwide shareholder class-action
litigation involving the Merrill takeover. Defendants include
Bank of America, Lewis and former Merrill CEO John Thain.
The Jan. 1, 2009, merger forced Bank of America to get a
second federal bailout and contributed to a 93 percent drop in
its share price over six months.
The cases are In re: Bank of America Corp Stockholder
Derivative Litigation, Delaware Chancery Court, No. CA4307; and
In re: Bank of America Corp Securities, Derivative, and Employee
Retirement Income Security Act (PRISA) Litigation, U.S. District
Court, Southern District of New York, No. 09-md-02058.
