New York’s Attorney General Andrew Cuomo filed a civil lawsuit on Thursday against senior Bank of America (BAC) executives, including former company CEO Ken Lewis, for allegedly “duping shareholders and the federal government” about the bank’s acquisition of Merrill Lynch.
Cuomo’s office accuses BofA, along with Ken Lewis, and its former CFO Joseph Price, for intentionally failing to disclose massive losses at Merrill prior to a December 5, ’08 shareholder vote ; so that shareholders would approve the merger.
“This [acquisition] has, in many ways, become a classic example of how the [actions] of our nation’s largest financial institutions led to the near-collapse of our financial system,” Cuomo said in a statement. “Bank of America, through its top management, engaged in a concerted effort to deceive shareholders and American taxpayers at large. This was an arrogant scheme hatched by the bank’s top executives who believed they could play by their own set of rules. In the end, they committed an enormous fraud and American taxpayers ended up paying billions for Bank of America’s misdeeds.”
Cuomo was joined in the lawsuit by Special Inspector General for the TARP Neil Barofsky, whose office aided in the investigation.
The news came just after the U.S. Securities and Exchange Commission announced that N.C.-based Bank of America had agreed to pay $150 million to settle complaints over its handling of the Merrill merger.
A spokesperson for Bank of America called the charges “regrettable” and “totally without merit,” adding that both Lewis and Price were “consistent with their legal and fiduciary obligations.”
BofA also said in a statement that “the SEC had access to the same evidence as [Cuomo] and concluded that there was no basis to enter either a charge of fraud or to charge individuals.”
“The company and these executives will vigorously defend ourselves,” it added.
Cuomo’s office said Brian Moynihan, the newly-appointed Bank of America CEO, had no responsibility in the firm’s failure to disclose Merrill’s losses and therefore is not under investigation.
BAC shares fell nearly 5% in afternoon trading Thursday.