Bank of America Settles With SEC, Faces New Suit from NY AG
Posted Feb 4, 2010 2:08 PM CDT
By Martha Neil
The Bank of America today settled two Securities and Exchange Commission regulatory complaints over its handling of Merrill Lynch & Co. losses and bonuses by agreeing to pay a $150 million fine and improve the bank's corporate governance rules. The agreement must still be approved by the federal judge overseeing the case before it is final.
But at the same time the Bank of America was also forced to start gearing up for a new court battle, as the New York attorney general, Andrew Cuomo, today filed a state-law civil fraud suit against the bank and two former executives over essentially the same set of facts. His complaint contends that the defendants misled both Bank of America shareholders and the government about the financial condition of Merrill Lynch as the bank was completing a merger with the financial services company, the New York Times reports.
Bank of America was "motivated by self-interest, greed, hubris and a palpable sense that the normal rules of fair play did not apply to them," Cuomo contends. He asserts the bank's top management understated Merrill Lynch losses to shareholders to win their approval of the merger at the same time that they painted a different picture to the federal government to obtain $20 billion from the taxpayer-funded Troubled Asset Relief Program.
In addition to the Bank of America, former chief executive Kenneth Lewis and chief financial officer Joe Price are also named as defendants. (Price remains with the bank although he is no longer its chief financial officer.)
Responding on behalf of the Bank of America, spokesman Bob Stickler says there was no such fraud:
“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,” says Stickler in an e-mail to the Times. “The SEC had access to the same evidence as the New York AG and concluded that there was no basis to enter either a charge of fraud or to charge individuals. The company and these executives will vigorously defend ourselves.”
A copy of Cuomo's complaint is provided by Scribd.
Bloomberg: "Ken Lewis, Bank of America Sued by Cuomo for Fraud"
Business (The Atlantic): "Bank of America's Fraud Charges are Very Serious"
Wall Street Journal (sub. req.): "BofA, Executives Face Civil Charges by Cuomo "