NYAG Andrew Cuomo contends that B of A understated the losses and bonuses paid at Merrill Lynch to encourage shareholders to approve the deal. It then (allegedly) overstated the bank’s willingness to end the merger to regulators weeks later so that (allegedly) it could acquire $20 billion from the bank bailout, according to the lawsuit.
The acquisition was part of former Treasury Secretary Henry Paulson’s last-ditch effort to rescue the economy before it collapsed. The deal, which he helped orchestrate, needed to be finalized by midnight on Sunday, Sept. 14 (before markets opened the next day). But in a PBS Frontline documentary posted in June 2009, officials involved in the negotiations said Merril and Bank of America delayed the deal until the early morning because top executives were arguing over how to divide up bonuses. The economy collapsed two weeks later.
Cuomo called Bank of America’s actions “egregious and reprehensible” for deceiving not only shareholders, but also the federal government.
“Bank of America and its officials defrauded the government and the taxpayers at a very difficult and sensitive time,” Cuomo said at a press conference Thursday. “I believe that Bank of America officials exploited this fear.”
Bank of America spokesman Robert Stickler called the charges “regrettable” and “totally without merit.”
“The evidence demonstrates that Bank of America and its executives, including Ken Lewis and Joe Price, at all times acted in good faith and consistent with their legal and fiduciary obligations,” Stickler said. “In fact, the SEC had access to the same evidence as the NYAG and concluded that there was no basis to enter either a charge of fraud or to charge individuals.”
The Securities and Exchange Commission recently reached a settlement to resolve charges against B of A for similar issues. The bank agreed to pay $150 million to shareholders to settle the charges, but it must still be approved by the United States District Court for the Southern District of New York.
Bank of America received $20 billion from the 2009 bank bailout to help offset its losses from acquiring Merril. It paid it back in December.
PBS Frontline produced an incredibly comprehensive and thought-provoking documentary in February 2009, and another in June 2009 about how the financial meltdown and the bank bailout went down. (Click the links to view – obviously.)