Bank of America accused of fraud, deception
The New York Attorney General's office said Thursday it is filing civil charges against Bank of America and its former CEO Ken Lewis, saying the bank misled investors about Merrill Lynch when it acquired the Wall Street bank in late 2008.
Civil charges were also being filed against Joe Price, the bank's former chief financial officer. Price is now head of the bank's consumer banking division.
At the same time New York Attorney General Andrew Cuomo's office was filing its civil charges, the Securities and Exchange Commission also reached a settlement to resolve charges it brought against Bank of America over similar issues.
Lewis stepped down from Bank of America on Dec. 31 after almost a year of strife that followed the bank's purchase of Merrill Lynch.
Bank of America has been accused of failing to properly disclose losses at Merrill and bonuses paid to investment bank employees before the deal closed.
Cuomo called Bank of America's actions "egregious and reprehensible" in deceiving not only shareholders, but also the federal government.
The bank received an additional $20 billion in government bailout funds in January 2009 to help offset losses it absorbed as part of the Merrill Lynch acquisition. In December, Bank of America repaid the $20 billion, plus the initial $25 billion it received in government bailout money.
"We are disappointed and find it regrettable that the NYAG has chosen to file these charges, which we believe are totally without merit," Bank of America spokesman Robert Stickler said.
"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."
Bank of America agreed to pay $150 million to shareholders to settle the SEC charges. The agreement still must be approved by Judge Jed S. Rakoff of the United States District Court for the Southern District of New York.
Stickler said the company, along with the executives will "vigorously" defend themselves.
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