New York's Biggest Pension Announces $4.25 Million Settlement

(January 13, 2011) — The New York State Common Retirement Fund has announced a $4.25 million settlement with Bank of America Corp. and two former Merrill Lynch executives.

Based on court documents filed in July in US District Court in New York, the defendants attempted to hide the extent of the company’s involvement in risky subprime mortgage-backed securities, artificially inflating the value of the stock. The result: Major investor losses once the firm’s risky subprime exposure became apparent. The settlement additionally covers two former Merrill executives — company officials E. Stanley O’Neal and Jeffrey N. Edwards.

“The Fund was misled about the extent of Merrill Lynch’s participation in the subprime mortgage fiasco; that is unacceptable,” State Comptroller Thomas P. DiNapoli, trustee of the $132.8 billion state and local employee retirement fund, said in a statement. “I am responsible for protecting the secure retirement of more than one million system members, and I take that duty seriously. I am confident that this settlement makes up for a large part of the Fund’s losses. This sends a message that we will always fight to protect the best interests of our members.”

The law firm of Entwistle & Cappucci negotiated the settlement.

The New York State Retirement Fund has more than 1 million members, employees and retirees from state and local governments. As the stock market plummeted, its value dropped from its record high of about $154 billion in spring 2008 to $110 billion in 2009.