According to FUNDfire, an affiliate of the U.K.-based Financial Times, the lawsuit accuses Merrill Lynch of breaching its fiduciary duties by encouraging pension clients to direct their asset managers to execute trades through the firm and retain underperforming money managers that use its brokerage services.
Attorney Robert J. O’Connor of the O’Connor Berman Dotts & Banes law firm, which is handling retiree Mario Taitano and two others’ case against Merrill Lynch, said the ongoing litigation in Florida against the financial firm is of great importance to the local pension agency.
Taitano, a retired official of the Fund, accused Merrill Lynch of cheating the pension agency through bad investment advice and excessive hidden service fees.
He said Merrill Lynch breached its duty when it advised the Fund to invest “too aggressively” causing it to lose millions when the international stock market nearly collapsed in 2008.
The class action in Florida accuses Merrill Lynch of acting “in its own interest and for its own benefit when it received for itself direct or indirect benefits” from sources other than its pension clients, according to the Financial Times.
A federal judge in Jacksonville will rule on Merrill Lynch’s September motion to dismiss the lawsuit. If that is denied at an April 21 hearing, the case is likely to move forward, the Financial Times further said.
O’Connor said this is a relevant development in Taitano’s case against Merrill Lynch.
“It is of local interest because of the pending lawsuit filed by some retirees against Merrill Lynch and because the Retirement Fund board has, thus far, refused to join in that lawsuit because they claim “Merrill Lynch did nothing wrong” when it’s obvious to the retirees (and now the world) that they did,” O’Connor told the Variety in a letter faxed yesterday.
In a previous interview, Fund Chairman Sixto Igisomar said an assessment team that spent hours in legal research and analysis of the Fund’s investment policy concluded it was not in their best interest to join Taitano’s lawsuit.
The team said Merrill Lynch had nothing to do with the volatile activities of the international stock market at that time.
The Fund’s assets continue to shrink amid constant withdrawals to finance retirees’ pension checks.
The government failed to pay its contributions to the Fund for years — money intended to fund annuity checks.
It was only compelled to pay a fixed percentage last year following a court order.
The Fund won by default its lawsuit against the CNMI government which now owes the pension agency over $300 million.
Merrill Lynch filed for bankruptcy in 2008 but was acquired by Bank of America.
