24/7 Wall St.

Well, back in the history of American finance, the public and some members of Congress were lead to believe that Bank of America (BAC) bought Merrill Lynch as a way to save the world’s credit markets. Hank Paulson and Ben Bernanke allegedly held a gun to the bank’s chief Ken Lewis and threatened his job and the jobs of his board members if he backed out of his plan to buy the brokerage. They argued that if Merrill Lynch failed so could the financial system.

That now seems centuries ago. Since then, Bank of America has been accused of concealing Merrill’s fourth quarter 2008 losses and improperly disclosing that it paid at least $3.8 billion in bonuses to Merrill staff members.

The SEC charged the bank with filing inaccurate data about the bonuses and the timing of their payment in its proxy. The agency and B of A tried to patch over their differences with a $33 million fine to be paid by the company to clear all the dirt up. A federal judge did not think the settlement was adequate and the matter will now go to court.

B of A’s stay in the legal system could last for years. Some shareholders have now decided that what they see as fraud by the bank’s management could be an invitation to collect huge sums of money. According to Reuters, the Ohio Attorney General said the bank could owe members of a class action suit that he is managing “billions of dollars.” The news agency says that Attorney General Richard Cordray is leading the case on behalf of five pension funds.

Ohio is a big state, but only one of fifty. Beyond the states are all of those investors who might sue on their own or form separate class action pools.

The legal fees alone could be like a boat anchor for B of A.

Douglas A. McIntyre