Some 16,000 investors in real estate partnerships sold by Merrill Lynch & Co. Inc. have been offered $6 million to settle a class action lawsuit, the company confirmed.
The offer comes after another highly publicized case involving limited partnership investments sold by Prudential Bache Securities, now known as Prudential Securities Inc. Last month, Prudential reached a $371 million settlement with state and federal securities regulators over energy partnerships it sold in the 1980s.Merrill said its case was different. The nation's largest brokerage firm said it didn't engage in wrongdoing and says it is not under investigation by state or federal regulators.
Between Oct. 27, 1989 and Feb. 14, 1990, $234 million of the partnerships - called Arvida-JMB Partners, L.P.-II, were sold.
Merrill Lynch said the sales were "conducted fairly and honestly." The prospectus contained some 11 pages which discussed the risks of owning undeveloped land and the perils of the real estate market.
Merrill said it performed a thorough investigation of the partnerships, which invested in undeveloped land in Southern California. Investors sued after they received only one $20 distribution for every $1,000 partnership unit.
"While Merrill Lynch is disappointed that this investment failed to meet its objectives, this was due to market forces beyond anyone's control, in this case, a decline in the real estate market," Merrill said in a statement.
The brokerage firm would not discuss its reasons for making the settlement offer.
JMB Realty Corp. of Chicago and Merrill have proposed to settle the class action lawsuit, filed in U.S. District Court in Chicago, and the two firms will split the proposed $6 million settlement.
Merrill spokesman Fred Yager denied charges that Merrill pushed the risky investments on unsuspecting investors.
"Absolutely not. We have suitability standards and we stick to them," Yager said.