Merrill Settles Ohio B&C Case for $450 Million

Merrill Lynch & Co. -- now the property of Bank of America -- has agreed to pay $450 million to settle a subprime collateralized debt obligation lawsuit brought by lead plaintiff the Ohio State Teachers Retirement System. According to the complaint, Merrill Lynch artificially inflated the value of CDOs and other assets backed by subprime mortgages by issuing false and misleading statements about the bonds. In a public filing, Merrill says it settled the case but did not admit any wrongdoing. During the height of the subprime crisis, Merrill financed several non-bank subprime funders, bought their loans and packaged them into ABS and CDO investments, selling them worldwide. Merrill also settled a similar, $75 million case brought against it by employees. In a new SEC filing, the Wall Street firm says that even though a settlement has been reached there is no assurance that a "final" deal will be concluded and gain court approval. According to the law firm of Page, Perry LLC of Atlanta, "This development confirms that even larger, more sophisticated investors can recoup damages when they are misled into purchasing complex investments such as CDOs that are virtually incomprehensible for normal people." It adds that the settlement "may be the first in what is likely to become a trend."