Securities fraud claims against Bank of America and two former executives related to the bank's 2008 acquisition of Merrill Lynch & Co. can continue.  U.S. District Court Judge Kevin Castel ruled that plaintiffs could continue to pursue claims against the bank, along with former CEO Kenneth Lewis and former CFO Joe Price, whom they accuse of failing to disclose Merrill's deteriorating financial condition in the fourth quarter of 2008.

Judge Castel did, however, dismiss claims the defendants had failed to disclose the federal government's financial support to BofA for facilitating the Merrill deal.  He also dismissed claims on behalf of holders of various preferred shares, debt and call options for lack of standing.

BofA Announcement it Would Buy Merrill.   In September 2008 at the height of the financial crisis, BofA announced plans to purchase Merrill Lynch for $50 billion. The deal, which met with intense investor backlash, proved to be the last in a string of acquisitions for the bank under Mr. Lewis. 

In early 2009, Merrill posted a Q4 2008 loss of $15 billion - the largest in that company's history - just as BofA announced a 2nd U.S. government bailout to help absorb the investment bank's higher-than-expected losses.  The deal has since been under federal and state investigation, in search of proof that the bank had failed to disclose key facts about Merrill's financial health before a shareholder vote on the deal.

The case is: In Re: Bank of America Corp. securities, U.S. District Court for the Southern District of New York, No. 1:09-md-02058.   [Reuters, 7/29/11]