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Top executives at Merrill Lynch are being sued by a shareholder who claimed they breached their duty to the firm by investing in "risky" collateralised debt obligations.
The complaint, filed yesterday in Manhattan federal court, names Stan O'Neal, who stepped down this week as chairman and chief executive officer, and other executives including co-presidents Gregory Fleming and Ahmass Fakahany.
In the so-called derivative suit, brought on behalf of the firm, the investor claimed Merrill wrongly invested in the CDOs and misrepresented its financial results, a claim Merrill has denied. New York-based Merrill said it would write down more than US$8 billion ($10.5 billion) in the value of its CDOs, according to the complaint.
"How did Merrill Lynch's board punish O'Neal for this staggering loss?" the shareholder, Patricia Arthur, asked in the complaint. The firm "allowed O'Neal to retire giving him an exorbitant severance package valued at more than US$160 million."
The suit seeks class-action, or group status, damages and an order directing Merrill to implement corporate governance changes.
- Bloomberg
