Merrill Lynch has reached a settlement agreement in a lawsuit filed against it over allegations of racial discrimination. That’s according to a report from Michael Tarm of the Associated Press (via USA Today).
Merrill Lynch settles with 700 plaintiffs
The suit was filed against the financial firm on behalf of hundreds of black financial advisers. The lawsuit was filed in Chicago and went through two appeals at the U.S. Supreme Court. Under the terms of the settlement, Merrill Lynch will pay $160 million.
An attorney for the plaintiffs confirmed the settlement and said that it is one of the biggest settlements ever in a case involving racial discrimination. The settlement pool of cash will be available to all black financial advisers and trainees at Merrill Lynch since May 2011.
George McReynolds was the primary plaintiff in the case, and he claimed that Merrill Lynch had a pattern of discrimination which resulted in black financial advisers having lower production than white advisers. He said the brokerage firm purposely put black advisers into clerical positions while divert accounts that were the most lucrative to white advisers. He said as a result, black advisers received lower pay and did not have as many opportunities for career growth while at the firm.
In addition to the settlement payment, the firm also said it would receive advice from black employees about how to improve their chances at succeeding in the brokerage industry. That’s according to a report by DealBook’s Patrick McGeehan.
Inter-racial trust in finance
One of the many twists and turns in the case was a startling admission by E. Stanley O’Neal, Merrill Lynch’s first black CEO. He said black financial advisers were at a disadvantage to white advisers because most of the firm’s prospective clients were white and might not trust their money to advisers who were not.
At the time that the suit was filed in 2005, about one out of 75 brokers at Merrill Lynch was black, and the firm considered most of them to be poor producers. McReynolds said in the original suit that black advisers did not receive much help from their managers and were often not accepted by their coworkers.