New York Attorney General Andrew Cuomo unveiled a major legal action against senior Bank of America executives Thursday over its controversial purchase of Merrill Lynch, including bringing civil charges against its former CEO Ken Lewis.
Cuomo’s office, which has been aggressively pursuing an investigation into the merger and subsequent bonuses paid to former Merrill employees, said it was charging Lewis and Bank of America’s chief financial officer Joe Price, who was recently appointed to lead the firm’s consumer banking business.
The lawsuit contends that the bank’s management team understated the losses at Merrill in order to get shareholders to approve the deal, then subsequently overstated the firm’s willingness to terminate the merger in order to get $20 billion of additional aid from the federal government.
“Bank of America, through its top management, engaged in a concerted effort to deceive shareholders and American taxpayers at large,” Cuomo said in a statement.
“This was an arrogant scheme hatched by the bank’s top executives who believed they could play by their own set of rules.”
A spokesperson for Bank of America called the charges “regrettable” and “totally without merit.”
Separately, the Securities and Exchange Commission said Thursday it had struck an agreement with Bank of America over the company’s decision to pay $3.6 billion of bonuses to former Merrill employees for fiscal year 2008.
Under the terms of the proposed settlement, the Charlotte, N.C.-based lender will pay a $150 million penalty to its shareholders who were affected by the disclosure violations.
The company also agreed to implement a number of corporate governance changes for the next three years including giving its shareholders an advisory vote, or “say on pay” of its executives.
The settlement will be subject to the approval of U.S. District Court Judge Jed Rakoff, however.
Rakoff scuttled a previous agreement between the two parties last fall, arguing that the original $33 million settlement was not only paltry, but would only impact those who were hurt by the bonus scandal: the company’s shareholders.
Another candidate for the Bernie Madoff wing at Club Fed.