UPDATE 2-BofA wins dismissal of two lawsuits over Merrill

* Judge Jed Rakoff had earlier rejected BofA-SEC pact

* Plaintiffs wanted BofA board to sue Merrill officials

* Judge says no showing board failed to act properly
(Adds background, details from ruling, byline)

By Jonathan Stempel

NEW YORK, March 29 (Reuters) – A Manhattan federal judge
dismissed two lawsuits seeking to force Bank of America Corp
(BAC.N: Quote, Profile, Research) to sue former Merrill Lynch & Co executives and
directors over losses in mortgages and other risky debt.

The ruling was issued on Tuesday by U.S. District Judge Jed
Rakoff, the same judge who rejected Bank of America’s original
$33 million settlement of U.S. Securities and Exchange
Commission charges that it failed to disclose Merrill’s losses
before shareholders voted on the companies’ merger in December
2008. He later approved a revised $150 million accord.

Bank of America shares have fallen 60 percent since the
merger was announced in September 2008, and Merrill’s losses
contributed to the largest U.S. bank being forced to obtain $45
billion of federal bailout money.

This month, the Federal Reserve rejected Bank of America’s
plan to raise its dividend, a sign it still views the bank as
weaker than its main rivals.

But Rakoff said the plaintiffs in the lawsuits failed to
show that Bank of America’s board failed to sue former Merrill
officials, including one-time Chief Executive Stanley O’Neal,
because it was “so involved in the underlying wrongdoing” or
acted in bad faith. The plaintiffs in both cases are Bank of
America shareholders.

“The court does not take this step lightly,” he said, “for
the allegations of the complaints, if true, describe the kind
of risky behavior by high-ranking financiers that helped create
the economic crisis from which so many Americans continue to
suffer.”

Bank of America is based in Charlotte, North Carolina. It
bought Merrill on Jan. 1, 2009, four weeks after shareholders
of both companies approved the merger.

Bill Halldin, a bank spokesman, declined to comment.
Lawyers for the plaintiffs and Merrill defendants, including
O’Neal, did not immediately return requests for comments.

Merrill’s losses from collateralized debt obligations and
subprime mortgages started to spiral higher in the third
quarter of 2007, and the plaintiffs said Bank of America hid
even higher losses after announcing the merger.

In approving the revised SEC accord in February 2010,
Rakoff had written that Bank of America failed prior to the
shareholder votes to adequately disclose the scope of Merrill’s
“historically great” losses, or that it had authorized Merrill
to pay as much as $5.8 billion of bonuses.

But he said the law required that he give substantial
deference to the SEC. He called the accord “better than
nothing,” but only “half-baked justice at best.”

Bank of America itself still faces a variety of litigation
over Merrill, including a lawsuit brought by then-New York
Attorney General Andrew Cuomo against the bank and Kenneth
Lewis, the chief executive at the time of the merger.

Shares of Bank of America closed on Tuesday down 2 cents at
$13.35 on the New York Stock Exchange.

The case is In re: Merrill Lynch & Co Inc Securities,
Derivative and ERISA Litigation, U.S. District Court, Southern
District of New York, No. 07-09633
(Reporting by Jonathan Stempel; Editing by Gary Hill and Carol
Bishopric)

UPDATE 2-BofA wins dismissal of two lawsuits over Merrill