(Reuters) - Bank of America Corp (BAC.N) directors rejected allegations by unhappy shareholders that their proposed $20 million settlement of litigation over the purchase of Merrill Lynch & Co was made "on the cheap" and was the product of collusion.
The accord would resolve a New York lawsuit claiming the bank's board, including former Chief Executive Officer Kenneth Lewis, had hidden how Merrill was headed toward an eventual $15.84 billion quarterly loss, even as it was paying $3.6 billion of bonuses.
The settlement also called for governance changes, including the creation of a board-level committee of independent bank directors to assess major new transactions, court papers show.
Bank of America did not reveal the scope of Merrill's losses until after shareholders approved the merger in December 2008.
In a Friday night filing in the U.S. District Court in Manhattan, directors said the objecting shareholders had no authority to block the settlement, which the shareholders fear would wipe out their claims in a similar lawsuit in Delaware.
The directors said the shareholders had waited an "inexcusably" long three years to get involved in the case and called their $5 billion damages claim "outrageous."
The directors also said there was "nothing collusive" about settlement talks.
"At bottom, the Delaware plaintiffs' arguments amount to nothing more than a dressed-up objection to the adequacy of the proposed settlement," the directors said.
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