News

Pension boards reach settlements with Merrill Lynch

Two of the city’s pension fund boards were advised by their attorneys at their board meetings yesterday that their legal claims against the brokerage firm Merrill Lynch, Pierce, Fenner & Smith had been settled and that the boards could expect their settlement checks to be delivered within the week.  The settlement brings to a close millions of dollars worth of legal claims that were filed in 2009 by the General Employees Pension Fund Board and the Fire Fighters Pension Fund Board against Merrill Lynch.

In February 2009, the Firefighters’ Pension Board filed a lawsuit filed in Escambia County circuit court claiming that Merrill Lynch and one of its employees who was acting as the Board’s consultant defrauded the Pension Fund out of millions of dollars.  The firefighters’ complaint alleged that Merrill Lynch and the consultant engaged in a scheme that resulted in Merrill Lynch receiving large amounts of brokerage commissions from excessive stock trading which resulted in higher costs to the pension fund.  The Pension Fund Board also claimed that Merrill Lynch should have advised the Board to invest in index funds rather than with money managers who engaged in excessive stock trading.  By investing with index or “passive” managers, the suit claimed, the pension fund would have performed better and paid less in management fees.

The General Employees Pension Board filed their claim against Merrill Lynch in arbitration in May 2009.  The general employees made a similar claim regarding Merrill Lynch’s defrauding the Pension Fund by directing money managers to send brokerage commissions from excessive trading to Merrill Lynch.

The trustees of the pension boards were advised that, except for limited circumstances, the terms of the settlement, including the settlement payment, should remain confidential.