Copyright 2010 Landmark Communications, Inc.All Rights Reserved The Virginian-Pilot(Norfolk, VA.)
February 5, 2010 Friday The Virginian-Pilot Edition
SECTION: FRONT; Pg. A9
LENGTH: 538 words
HEADLINE: BofA, former CEO sued as bank settles with SEC
BYLINE: STEPHEN BERNARD
By Stephen Bernard and Ieva M. AugstumsThe Associated Press NEW YORKThe New York Attorney General’s Office said Thursday that it filed civil charges against Bank of America and its former CEO Ken Lewis, saying the bank misled investors about Merrill Lynch before it acquired the Wall Street bank in early 2009. Civil charges were also being filed against Joe Price, who was chief financial officer at the time of the deal and is now head of BofA’s consumer banking division. At the same time that Attorney General Andrew Cuomo’s office was filing its civil charges, the Securities and Exchange Commission reached a settlement to resolve federal charges it brought against the bank over similar issues. It is the second time the SEC and Bank of America have tried to settle that case.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. The bank, Lewis and Price are facing charges under New York’s Martin Act, a wide-ranging securities law that is aimed at fighting fraud.Cuomo’s use of the Martin Act could be problematic for Lewis and Price. Unlike federal securities law, the Martin Act doesn’t require proving any intent to defraud shareholders, said John Coffee, a Columbia Law School professor specializing in corporate governance and securities law.Because it is a civil charge, there is no possibility of jail time.BofA got an additional $20 billion in 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.Lewis stepped down as CEO from Bank of America Corp. on Dec. 31. Cuomo’s office claims BofA intentionally misled shareholders about the more than $15 billion in losses Merrill recorded in the fourth quarter of 2008 to get the deal completed. Bank of America also hid $3.6 billion in year-end bonuses Merrill employees received as it asked its shareholders to approve the deal, the suit alleges.Bank of America then used the mounting losses to force the government to provide it with the additional $20 billion in bailout money, the lawsuit claims. Lewis has testified before Congress that he was forced by government regulators to complete the deal, even though he had trepidation about doing so.BofA spokesman Robert Stickler said, “We are disappointed and find it regrettable that the NY AG has chosen to file these charges, which we believe are totally without merit.” Mary Jo White, Lewis’ attorney, said in a statement that Cuomo’s decision to sue was “a badly misguided decision without support in the facts or the law.” Lawyers for Price said the attorney general’s allegations were “flatly contrary to the evidence.”BofA agreed to pay $150 million to shareholders to settle the SEC charges. The agreement still must be approved by U.S. District Judge Jed Rakoff. In September, the bank and the government agreed to a $33 million settlement. Rakoff rejected that deal. the issueBank of America has been accused of failing to properly disclose losses at Merrill Lynch and bonuses paid to investment bank employees before the deal closed.
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