It's "deja vu all over again," for Bank of America.  A federal judge in New York "substantially denied" BofA Merrill Lynch's motions to dismiss a September 2009 case filed by Ohio AG Richard Cordray on behalf of 5 pension funds.  The Court approved the securities fraud and false proxy claims against the companies and their respective management officials.

The lawsuit alleges that Bank of America, during merger negotiations, agreed to allow Merrill Lynch to pay up to $5.8 billion in accelerated year-end bonuses to its executives and employees, but failed to disclose that information to shareholders before they voted to approve the merger.  Additionally, in the 2 months before shareholders voted on the merger, ML suffered billions of dollars in losses.  The complaint alleges that senior executives at both ML and BofA were aware of these massive losses but did not disclose the information to investors prior to the shareholder vote on the merger.

Specifically, the court indicated that the following claims could proceed:

• Securities fraud claims against BofA, ML, and their respective CEOs, Ken Lewis and John Thain, for alleged misstatements related to the failure to disclose the agreement to pay up to $5.8bn in discretionary bonuses, and against Ken Lewis and BofA for alleged omissions related to the bonus arrangement.
• False proxy statement claims against Ken Lewis, John Thain, BofA, ML and certain BofA directors about the bonus arrangement.
• False proxy statement claims against all defendants arising out of their failure to disclose ML's Q4 2008 losses.
• Liability claims against certain officers and directors for issues under their control.
• Claims relating to false offering statements that misstated or omitted ML's bonus payments.

The district court dismissed certain securities fraud claims, including claims relating to the failure to disclose Merrill Lynch's fourth quarter 2008 losses.

“In the order, Judge Castel held that liability under the false proxy statement claims in this case could be imposed if negligence is shown. He squarely rejected the defendants’ position that the lead plaintiffs must make a more stringent showing of ‘scienter’-- knowing or reckless intent to deceive or defraud. We are looking forward to developing evidence against the defendants under this negligence standard.”   - Richard Cordray