Stock Drop Suit Hits BoA over Countrywide, Merrill Deals

February 3, 2009 (PLANSPONSOR.com) - A Bank of America (BoA) employee has hit the financial services giant with a stock drop suit alleging the company's acquisitions of Countrywide Financial Corp. and Merrill Lynch left BoA exposed to "toxic" subprime mortgage-related assets.

BoA employee Vernon C. Dailey's suit, which seeks class action status, charged that the plan kept company stock as a 401(k) investment option beyond the point when it was still prudent to do so.

According to the complaint, throughout the suggested class period from January 11, 2008, to the present, the plan included stock as an investment option and the plan held over $3 billion in BoA stock, which represented nearly 32% of the plan's total investments as of December 31, 2007.

Dailey alleged in his lawsuit that BoA breached its Employee Retirement Income Security Act (ERISA) fiduciary duties by making misrepresentations about the company's failure to adequately assess the merits of BoA's acquisition of both Countrywide and Merrill.

"[T]he plan's fiduciaries knew or should have known that, as a result of the acquisition of these two toxic 'black boxes,' the financial health of BOA was in serious doubt and that allowing Plan Participants to continue to invest their retirement savings in BOA stock in the wake of these acquisitions was imprudent," the complaint said.