Bank of America Corporation (NYSE:BAC) Hit With Class Action Lawsuit

More fallout from what is becoming a debacle for Bank of America Corporation (NYSE:BAC) in relationship to its acquisition of Merrill Lynch, and its alleged misbehavior in bonuses awarded to executives of Merrill Lynch of $5.8 billion, is growing, as now a class action lawsuit has been filed in the Southern District of New York by Kendall Law Group in regard to that situation.

According to documents, the lawsuit comes from public communications the company made from the period from September 15, 2008 through January 21, 2009. The lawsuit centers around the alleged concealing of facts in relationship to bonuses offered to Merrill Lynch workers before the acquisition of the company had taken place.

Compensation is being sought because of claims the share prices of the company were artificially inflated because of the statements from the company which misled investors and shareholders in relationship to the true value of the stock, in light of the alleged hidden bonuses at Merrill Lynch.

Securities, both debt and equity, were sold during the period of time targeted by the class action lawsuit, which were worth about $10 billion. About 455 million shares of common stock was sold during that time at about $22 a share.

Much of this is probably coming from proxy statements Bank of America communicated to shareholders in reference to media reports on Merrill Lynch employees going to be awarded huge bonuses. In the proxy statement, Bank of America told shareholders to ignore the press reports, implying they were inaccurate, even though they knew the bonuses were going to be awarded.

That’s the part of another lawsuit being faced by Bank of America with the SEC, where the same battle is being fought based on the proxy statement which had been released by Bank of America.

The judge in that case just denied Bank of America witnesses the use of media reports as evidence shareholders knew about the bonuses, based on the proxy report’s statements.

I don’t see how Bank of America can get around the proxy statement, and that could cost them millions more in rewards to those suing them, now that the judge has ruled media reports inadmissible as evidence.

That will probably strengthen the class action case we’re talking about, and pressure the banking giant to capitulate and settle. Bank of America will also have to decide whether it’s worth the negative publicity to keep on defending in cases they may have little chance of winning.