Merrill sued in U.S. over illiquid securities

NEW YORK Aug 6 (Reuters) - Teva Pharmaceutical Industries Ltd (TEVA.TA) and Seneca Gaming Corp sued Merrill Lynch in separate lawsuits on Thursday over investments in auction rate securities, a risky debt market that collapsed in early 2008.

Teva, the world's biggest maker of generic drugs, sued Merrill, now owned by Bank of America Corp (BAC.N), over the purchase of $273 million in auction rate securities (ARS) -- debt reset at periodic auctions by Wall Street companies that had touted it as a safe, cash equivalent.

The complaint in Manhattan federal court said Teva had suffered "staggering losses" from buying the securities from Merrill, which structured ARS backed by collateralized debt obligations.

Several U.S. investigations have led to settlements in which companies have paid back investors.

Charlotte, North Carolina based Bank of America completed a takeover of Merrill in January. Teva said in its complaint the securities were worth "substantially less" than the $237 million it paid for them.

They could not be easily resold because they turned out to be illiquid when the market failed.

In the second lawsuit filed in the same court, Seneca Gaming Corp [SENGA.UL] sued Merrill for making "false and misleading statements" in inducing the company to buy millions of dollars in securities that were presented as liquid.

The complaint said SGC, created under the charter from the Seneca Nation of Indians in New York State in August 2002, was unable to access $5 million of its cash, causing "significant harm" to the company.

"The cash SGC maintained in its account with Merrill was necessary for satisfying construction costs and other expenses," the complaint said.

A spokeswoman for Bank of America said the bank had no comment on the Teva lawsuit and had no immediate comment on the second complaint.

The cases are Teva Pharmaceutical Industries Ltd v Merrill Lynch 09-6936 in U.S. District Court for the Southern District of New York (Manhattan) and Seneca Gaming Corporation v Merrill Lynch 09-6969 in U.S. District Court for the Southern District of New York (Manhattan) (Reporting by Grant McCool; editing by Andre Grenon)