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Another Headache for Bank of America
As if Bank of America executives didn’t have enough to worry about over the acquisition of Merrill Lynch last year.
They’re already facing a lawsuit from the Securities and Exchange Commission. New York Attorney General Andrew Cuomo is out to tack executives’ hides to his wall. A Congressional committee has forced the bank to turn over documents related to the acquisition.
And now, Ohio Attorney General Richard Cordray says he is leading a class-action lawsuit against the banks, CEO Ken Lewis, and other executives that could eventually result in billions in damages.
The lawsuit by five pension funds from Ohio, Texas, Sweden, and the Netherlands alleges Bank of America and Netherlands officials hid widening losses at Merrill and approved huge bonuses at the investment bank without telling shareholders before a crucial vote allowing Bank of America to take over Merrill.
Chief Financial Officer Joe Price, accounting chief Neil Cotty, and John Thain, the former Merrill chairman and CEO, are also named in the suit.
House Oversight and Government Reform Committee chairman Edolphus Towns also wants to know more about the bonuses and losses at Merrill before the purchase, as does Cuomo.
Cuomo has wondered about some of the same questions and has grilled the bank’s CEO, Kenneth Lewis, about the merger. He now plans to question members of the bank’s board about the merger, and he has threatened that charges may be on the way for Bank of America and its officers.
The bank has cited lawyer-client privilege for refusing to produce some of the information investigators seek.
The SEC reached a deal with the bank under which the bank would pay $33 million to make the issue of who knew what and when before the Merrill deal go away. But a Federal Judge Jed Rakoff refused to accept the settlement and ordered the bank and the SEC to get ready for a trial.
Kent Bernhard Jr. is News Editor of Portfolio.com
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