Bank of America will pay $315 million to settle investors' claims that they were duped about mortgage-backed investments sold by its Merrill Lynch unit.
The Public Employees' Retirement System of Mississippi pension fund led the class-action lawsuit. The fund claimed that the investments were backed by poor quality mortgages written by subprime lenders Countrywide Financial Corp., First Franklin Financial and IndyMac Bancorp, a bank that failed in 2008.
The settlement represents another move by Bank of America to put its legal issues behind it. In the first half of the year, the bank put up $12.7 billion to settle similar claims from different groups of investors. The latest settlement was disclosed in court papers filed this week in U.S. District Court in Manhattan and requires the approval of a judge, which could prove difficult since the settlement includes no admission of guilt from Bank of America.
Just last week, the judge assigned to the case - U.S. District Judge Jed Rakoff - rejected a $285 million settlement that Citigroup Inc. reached with the Securities and Exchange Commission. The settlement would have imposed penalties on Citigroup even as it allowed the company to deny allegations it misled investors.
Rakoff said the public has a right to know what happens in cases that touch on "the transparency of financial markets whose gyrations have so depressed our economy and debilitated our lives." In such cases, the SEC has a responsibility to ensure that the truth emerges, he wrote.
