New York attorney general sues Bank of America, ex-CEO Ken Lewis
Bank of America Corp. and its former chief executive, Kenneth D. Lewis, were accused of fraud Thursday for allegedly failing to disclose huge losses at Merrill Lynch before the brokerage was acquired by the giant bank.
The bank and Lewis misled not only its shareholders but also the government about the size of the losses at the height of the financial crisis, according to a lawsuit filed in New York state court by the state’s attorney general, Andrew Cuomo.
The purchase of Merrill Lynch has been a long legal headache for Bank of America.
The complaint says that the bank purposely understated Merrill Lynch’s losses to win shareholder approval of the acquisition.
A week later, the suit says, the bank overstated the same losses to secure $20 billion in additional funding from the government’s Troubled Asset Relief Program.
“The conduct of Bank of America, through its top management, was motivated by self-interest, greed, hubris and a palpable sense that the normal rules of fair play did not apply to them,” the complaint says.
Mary Jo White, a lawyer for Lewis, called the lawsuit “a badly misguided decision without support in the facts or the law.”
“There simply is no basis for any case against Mr. Lewis or any other individual” in the case, she said in a statement.
Bank of America’s former chief financial officer, Joe Price, also is named as a defendant in the civil litigation.
Cuomo announced the suit shortly after the Securities and Exchange Commission said it was settling its litigation against Bank of America over the payment of $5.8 billion in bonuses to Merrill Lynch employees shortly after the acquisition closed.
The complaint says the bank’s new chief executive, Brian Moynihan, was involved in the discussions about the Merrill losses, but Moynihan is not being sued.
Cuomo worked on the suit with Neil Barofsky, the Treasury Department’s special inspector general for TARP, who joined Cuomo in announcing the lawsuit.
Bank of America representatives couldn’t immediately be reached for comment. In a statement about the settlement with the SEC, the company said “the SEC staff has determined that no one acted with any intent to mislead.”
