The new BankAmerica Corp. is facing at least 16 shareholder lawsuits alleging a failure to disclose the extent of its recent losses.
The suits, filed in New York, California, and North Carolina, were characterized by one observer as "ambulance chasing at its best."
But they could be highly distracting, if not costly, at a time when the newly combined operations of BankAmerica and NationsBank Corp. are striving to take full advantage of their unique coast-to-coast status.
Such class actions can drag on for years, and related costs could run into tens or even hundreds of millions of dollars, according to securities litigation specialists.
Still, most observers said they believe the litigation will have little effect on the Charlotte, N.C., banking company's bottom line.
"I can't say if the suits have any merit, but I can say they are not impacting (earnings) estimates," said R. Jay Tejera, an analyst with Dain Rauscher Wessels. "No clients are bringing it up. It's almost a non-event."
BankAmerica officials refused to discuss the lawsuits, other than to declare them "without merit," said spokesman Robert Stickler. They vow to "defend them vigorously."
Wachtell Lipton Rosen & Katz in New York represents BankAmerica in the cases.
The plaintiff attorneys, all frequent filers of shareholder actions, include Abbey Gardy & Squitieri, Bernstein Litowitz Berger & Grossman, Milberg Weiss Bershad Hynes & Lerach, and Wolf Popper.
The petitions seek damages for several different classes of investors. Among them are shareholders who were eligible to cast a vote on the merger, which closed Sept. 30, and individuals who traded put or call options related to the deal.
The filings from the multiple plaintiff-bar law firms, which purport to represent thousands of shareholders and seek an undetermined amount of damages, are based on the premise that BankAmerica officials violated securities laws by keeping investors in the dark about the extent of losses.
When it reported third-quarter earnings Oct. 14, BankAmerica disclosed that it had charged off $372 million of an unsecured $1.4 billion loan to hedge fund operator D.E. Shaw & Co. of New York, and had made a $500 million provision for overseas trading losses. As a result, net income fell 78%.
Two weeks earlier, at a news conference heralding the newly minted merger, BankAmerica chairman and chief executive officer Hugh L. McColl Jr. said the company had less than $300 million in outstanding loans to hedge funds.
One of the first lawsuits, filed in New York by Abbey Gardy & Squitieri, said that Mr. McColl made "untrue statements of material fact," on Oct. 1, falsely reassuring investors.
The suits also charge that Mr. McColl and other officials knew in August that losses would be significant and that he failed to disclose that information to shareholders before they voted on the merger Sept. 24.
BankAmerica contends it did disclose problems in a Sept. 15 press release warning that third-quarter profits would be lower than expected.
Even analysts who closely follow the company were dismayed and surprised at the extent of the losses. But the analysts now say BankAmerica did follow the letter of the law.
"They have a fairly well-documented case in terms of timing and disclosure and what they knew when," said Sally Pope Davis, an analyst with Goldman Sachs. "They are big boys and girls, and they are aware of their legal obligations."
"I don't think they're going to be able to argue that they aren't negligent," said Jules Brody, senior partner with Stull, Stull & Brody in New York, one of the suing firms. Zucker Murray of Manhattan was listed as lead plaintiff.
"This was an ongoing subject since August, and the (NationsBank) deal didn't close till September," Mr. Brody said. "Yet there was nothing to hint at this in the merger documents. We think it is open-and-shut liability."
The recent recovery in BankAmerica's stock price may take some of the impact out of the shareholder allegations.
Jonathan Alpert, a Tampa-based securities litigation attorney who is not involved with the proposed class actions, said he doubted they would be much more than an annoyance to BankAmerica.
"They are so big that it is almost impossible to have a meaningful impact," he said.
Yet the suits have some merit, he contended.
"There is a positive goal of responsible corporate behavior that these lawsuits tend to generate," Mr. Alpert said. "By filing them, one would encourage a more responsible corporate ethic than is the case here."
