A federal judge signed off on a $2.43 billion settlement by Bank of America Corp. (BAC) to resolve claims that it misled investors ahead of its acquisition of brokerage firm Merrill Lynch & Co. during the financial crisis.

The payment is the largest settlement of shareholder claims by a financial firm since the downturn rocked the U.S. economy, led to the bankruptcy of Lehman Brothers Holdings Inc. and nearly caused the collapse of Merrill Lynch and other financial companies.

The settlement was reached last September as the Charlotte, N.C., financial services firm faced a potential trial over claims that the bank and its top officers made false or misleading statements about the financial health of Merrill Lynch and performance bonuses paid to Merrill employees ahead of the merger, which closed in January 2009. Bank of America denied the allegations, but has said it reached the pact in order to eliminate the uncertainty of protracted litigation.

At a hearing Friday, U.S. District Judge Kevin Castel in Manhattan found the settlement to be "fair, reasonable and adequate."

"This, unlike some class-action settlements, was hard fought, arm's length of the utmost way," the judge said. "This was the antithesis of a collusive settlement."

A Bank of America spokeswoman didn't immediately respond to a request for comment Friday.

Max Berger, a lawyer for the lead plaintiffs, which included retirement systems in Ohio and Texas, called the settlement "historic."

The judge also approved $152.4 million in legal fees, as well as expenses, in the case.

Bank of America moved to acquire Merrill over a weekend in September 2008 as several brokerage firms, including Lehman Brothers, were facing pressure due to the decline in the U.S. mortgage market and the overall economy. The bank had already acquired mortgage lender Countrywide Financial Corp earlier that year.

Lehman Brothers sought bankruptcy protection the day after the Merrill deal was announced.

However, the Merrill acquisition, which former Bank of America Chief Executive Kenneth Lewis initially hailed as the "deal of a lifetime," weighed on the bank's stock price and spawned a variety of litigation.

The company's stock lost more than half of its value from the time the deal was announced in 2008 and the 3 1/2 months until it closed, wiping out about $70 billion in shareholder value. The deal, valued at about $50 billion initially, was worth about $19 billion when it was completed Jan. 1, 2009.

The company also has set aside more than $42 billion in litigation expenses, payouts and reserves related to Countrywide and Merrill Lynch litigation since 2010. Investors have claimed that Countrywide was misleading about the quality of mortgages underlying securities issued before the crisis.

The bank has separately announced a landmark $8.5 billion agreement with a group of high-profile mortgage-bond investors. That settlement, which is being contested, is expected to be considered by another judge in May.

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(END) Dow Jones Newswires

04-05-13 1615ET