As if an 8 Billion write-off was not enough, Merrill is being hit with a shareholder lawsuit. They will not be the only ones, and sooner or later all the large investment banks that had subprime exposure will be embroiled in litigation.
It will be interesting to see the Plaintiff's try to circumvent the business judgement rule in law as applied to "reasonable" securities valuations...it will also be a good test to determine the facility of our legal system to conceptualize complicated securities.
NEW YORK (Reuters) -
An investor lawsuit has been filed against Merrill Lynch & Co Inc
(MER.N: Quote, Profile, Research), contending that the company issued
false and misleading statements about its exposure to risky mortgage
investments, the plaintiffs' lawyers said on Tuesday.
The lawsuit, which the lawyers said was filed in U.S. District Court
for the Southern District of New York, seeks class-action status. It
was brought by law firm Coughlin Stoia Geller Rudman & Robbins LLP on
behalf of an institutional investor, Life Enrichment Foundation.
The complaint accused Merrill of issuing materially false and
misleading statements about its financial exposure to collateralized
debt obligations (CDOS) containing subprime mortgage securities.
The company's statements "were materially false due to their failure
to inform the market of the ticking time bomb in the company's CDO
portfolio due to the deteriorating subprime mortgage market," the
Also named as defendants are Stanley O'Neal, who was ousted as Merrill
chairman and chief executive on Tuesday, firm Co-Presidents Ahmass
Fakahany and Gregory Fleming and Chief Financial Officer Jeffrey
The complaint was brought on behalf of purchasers of Merrill stock
between February 26 and October 23.
A Merrill representative was not immediately available for comment