The Wall Street Journal reports Merrill repurchased the CDOs for $13.9 million – the same price at which Springfield initially bought the securities. They are only worth $1.2 million, according to a recent account statement from Merrill, the Journal said.
A Merrill spokesman told the newspaper the firm investigated charges by the city that the investments were made without its permission and found that to be true, so it is making the city whole. Merrill also agreed to pay outside legal fees incurred by the Springfield Finance Control Board, which overseas the city’s finances.
Springfield officials contended that Merrill violated state law by not properly telling them what investments it was making on their behalf. Merrill also did not provide Springfield officials with the CDOs’ prospectus last spring when they were purchased.
A spokesman for the Massachusetts Attorney General’s office told the Journal it continues to investigate the matter.