Class-Action Lawsuit Filed Against Bank Of America

A class-action lawsuit filed late Wednesday afternoon claims that Charlotte-based Bank of America withheld information from stockholders before they approved the bank's merger with Merrill Lynch.

LINK: Read The Class-Action Complaint Against Bank of America

The lawsuit was filed in federal court in Atlanta by the law firm Chitwood Harley Harnes on behalf of Frank M. Boorn, a Bank of America stockholder, and all other shareholders of the bank. The suit claims the bank sent "false and misleading statements" in a proxy to stockholders before the merger vote in Charlotte.

The suit says that Bank of America disclosed the "dire financial condition" of Merrill Lynch and the bank's request for additional government funds only after the merger became final.

The lawsuit asks for damages to cover losses suffered by stockholders.

Although the market rebounded on Wednesday, Bank of America's shares plummeted 29 percent on Tuesday, sending shockwaves across the Queen City.

“Makes you nervous if you live in Charlotte, that's for sure,” said uptown worker Jack Cobb.

Analysts like University of North Carolina at Charlotte finance professor Tony Plath said the stock sell-off sends a dangerous message.

“The market is essentially saying that they're not confident that the management teams in place at Bank of America and Citigroup (whose stock plunged 20 percent) can see the company through,” Plath said.

The top of the Bank of America management ticket is CEO Ken Lewis, who is now under fire by some for his purchase of Merrill Lynch. The merger’s multi-billion-dollar losses have coincided with a steep decline in Bank of America stock.

Weeks after the purchase, in October, Bank of America was trading at just under $24 a share. By the end of November, the price was less than half that. Then Tuesday’s bad banking news from Europe snowballed and sent Bank of America stock to $5.10 a share.

That got Congressman Mel Watt's attention in Washington.

“We'll do whatever's necessary to keep financial institutions from going out the back door,” Watt, D-Charlotte, said.

On Wednesday, Lewis made his own move by reportedly buying 200,000 shares of stock worth $1 million. Plath watched Bank of America's stock price shoot up, but he said the coming days will be telling.

“What happens the remainder of this week is critical in terms of seeing whether or not the shareholders give management at Bank of America a vote of confidence,” he said.

Bank of America stock ended Wednesday at $6.68 -- up $1.58 from Tuesday’s low. Plath said it’s crucial for that price to stay at $6.50 or higher through the end of the week. He said if not, he thinks Lewis’ job could be in jeopardy.