Merrill Lynch to pay $475 million in Ohio settlement

People walk by the Merrill Lynch building in New York, September 15, 2008. REUTERS/Chip East

NEW YORK (Reuters) - Merrill Lynch & Co said it has agreed to pay $475 million in cash to settle a class action suit brought by the Ohio state teachers’ retirement system.

The pension fund and other investors were hit with heavy losses after Merrill Lynch wrote down billions of dollars in assets backed by subprime mortgages.

In a complaint filed in May, 2008, the pension fund alleged that Merrill in statements on collateralized debt obligations and related assets had inflated the market price for its own shares, causing investors to lose money.

The settlement will benefit investors who bought Merrill Lynch common and preferred shares between October 17, 2006 and December 31, 2008.

In addition, Merrill said it has agreed to pay $75 million in cash to settle a class action brought on behalf of its own employees, who bought its stock in retirement plans between September 30, 2006 and December 31, 2008.

The two settlements do not apply to shareholder derivative actions and claims brought by bondholders, Merrill said.

Bank of America bought Merrill Lynch in a deal that closed on New Year’s Day.

Bank of America turned to the U.S. Treasury on Friday for a second round of taxpayer money, $20 billion, hours before reporting a $1.79 billion quarterly loss and recording a $15.31 billion loss for Merrill Lynch.

Reporting by Ciara Linnane; editing by Leslie Gevirtz