AP Photo/Louis Lanzano
E. Stanley O'Neal, the first black executive at Merrill, has that white clients might make it harder to be a black broker at Merrill.
The news Wednesday that brokerage giant Merrill Lynch is paying $160 million to settle a lawsuit claiming it discriminates against black brokers is a huge deal.
Merrill has been fighting the class action for eight years and even unsuccessfully asked the Supreme Court to hear the case. The settlement is much higher than the sums other Wall Street firms have paid to make similar suits go away, The New York Times points out. (Morgan Stanley paid $18 million to settle a racial bias suit in 2008.)
George McReynolds, a 68-year-old broker who still works for Merrill, initially filed the lawsuit in 2005 and later got other brokers on board. Here are the worst allegations in the most recently amended complaint:
1) When McReynolds first sued Merrill in 2005, there were zero African-American brokers in 552 of Merrill's 639 offices.
The red parts of a map in the complaint [below] show the states where Merrill employed no African-American brokers.
2.) Black brokers at Merrill allegedly had an extremely high attrition rate. In the years prior to the lawsuit, 75% of African-American "trainee" brokers left before the training period was over, the suit said.
3) While Merrill publicized "diversity" initiatives, the firm allegedly didn't take those efforts seriously. One manager allegedly called the firm's diversity program a "public relations thing." If he were running the program, he said, he'd "hire a smart white guy and have a black guy for the face," according to the complaint.
4) Black brokers at Merrill said they were excluded from company-related golf outings because they were happening at clubs that didn't allow African-Americans.
5) African-American brokers were seen talking in a group in a New York office of Merrill and were asked, "Are you planning an uprising?" according to the complaint.
6) Merrill employees allegedly called some black brokers "niggers" and were never punished. One manager said to a non-black broker, "Are you going to let a nigger beat you?" according to the complaint.
7) Not only did Merrill's few black employees have to put up with racist language, they also got paid less, according to the complaint. The firm ranked its employees by putting them in five "quintiles" based on the amount of money they earned from commissions. Seventy percent of the firm's African-American brokers with at least 10 years of experience were in the bottom two quintiles, while white brokers were more evenly distributed.
Chicago lawyer Linda Friedman, who represents the brokers, provided The New York Times with details of the settlement. Merrill is refusing to confirm the terms of the deal, though.
In court documents, Merrill has made this statement on its non-discrimination policies: "Merrill Lynch has a company-wide policy prohibiting racial discrimination. It partners with African-American organizations in recruiting diverse brokers; provides diversity training to local managers; and ties local manager compensation to the hiring, retention, and success of diverse brokers."
Merrill has still acknowledged that black brokers haven't always fared well there.
"We are working toward a very positive resolution of a lawsuit that was filed in 2005 and enhancing opportunities for African-American financial advisers," Merrill spokesman Bill Halldin told the Times on Tuesday.
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