Merrill to pay back city for soured CDOs
Merrill Lynch will reimburse the city of Springfield, Mass., $13.9 million to settle a dispute over losses on CDOs.
Merrill Lynch & Co. Inc. will reimburse the city of Springfield, Mass., $13.9 million to settle a dispute over losses on collateralized debt obligations that Merrill brokers sold the city.
In the deal brokered by Massachusetts attorney general Martha Coakley, Merrill will pay the city for all of its investments, which plummeted in value following the subprime- mortgage collapse.
These CDOs, which are pools of debt that included subprime mortgages, are worth only $1.2 million, according to a recent Merrill account statement for Springfield, according to a report in The Wall Street Journal.
On top of the reimbursement, Merrill also agreed to pay outside legal fees incurred by the Springfield Finance Control Board, which oversees the city’s finances.
“The City of Springfield and the Springfield Financial Control Board have said that neither body approved the purchases of these investments,” said Mark Herr, a Merrill spokesman, according to The Journal.
“After carefully reviewing the facts, we have determined the purchases of these securities were made without the express permission of the city.
As a result, we are making the city whole and we have taken appropriate steps internally to ensure this conduct is not repeated.”
“My focus all along has been to recoup these funds for the taxpayers of Springfield,” said Springfield Mayor Domenic Sarno, according to a statement.
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