Merrill Lynch—now owned by Charlotte-based Bank of America—has reached a settlement with retired teachers in Ohio who sued when the brokerage firm allegedly misstated earnings expectations before the housing market tanked a year and a half ago.
The Ohio State Teachers Retirement System’s windfall: $475 million.
The Ohio pension fund—along with other institutional investors—sued Merrill Lynch for overstating the value of securities that were based on subprime mortgage investments.
According to the complaint, Merrill Lynch officers were touting the company’s stock almost up until the time it wrote down its subprime losses in May 2008, sending its stock price into a free fall.
Bank of America bought out Merrill Lynch on Jan. 1, 2009. The Ohio Public Employees Retirement System and three other pension funds are suing Bank of America over its handling of the acquisition.
Bank of America blamed bad loans for third-quarter 2009 losses of more than $2.2 billion. One of the bank’s only bright spots: strong third-quarter returns on Merrill Lynch investment banking deals.