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BofA, US Officials Meet on Merrill Lynch Deal

Bank of America executives met today with several government entities in the continuing investigation of what the bank disclosed about losses and bonuses at Merrill Lynch when it acquired the brokerage giant late last year, CNBC has learned.

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Sharon Lorimer

The meeting—which includes the Securities and Exchange Commission, New York Attorney General Andrew Cuomo, and the House Committee on Oversight run by Rep. Ed Towns—is the latest attempt to determine what was known about the bonuses and losses before they became public.

Sources familiar with what was discussed at the meeting told CNBC that the BofA executives told the officials that they relied on legal counsel to make their decisions regarding the Merrill Deal.

BofA execs also claimed that Merrill's $15 billion loss in the fourth quarter of 2008 would have been significantly greater were it not for two one-time gains. BofA says those losses accelerated after bank shareholders voted on the Meririll deal on Dec. 5.

The briefing includes descriptions of emails between BofA executives and their attorneys at Wachtel Lipton regarding the Merrill Lynch deal.

Bank of America contends the documents show the deliberations were made in good faith and support the comments that BofA's CEO Ken Lewis has made publicly.

Earlier this week, the SEC entered an agreement with BofA over the disclosure of information in the Merrill Lynch case.

"In particular, the order negotiated by the SEC would allow us to assess further details surrounding the Bank's failure to disclose to its shareholders critical information concerning the award of bonuses to Merrill employees, including any relevant information previously withheld based on attorney-client or other privileges," SEC Spokesman John Heine said in the statement.

The SEC is investigating details of Bank of America's decisions about whether to disclose impairment of goodwill and other financial results of Merrill Lynch during the fourth quarter of fiscal year 2008 as well as its communications with the Federal Reserve, the Treasury and other federal officials regarding aid.

The agreement also allows the probing of previously privileged details of Bank of America's consideration on invoking the material adverse change clause in its agreement to merge with Merrill Lynch, the statement said.

Bank of America sent a letter to Attorney General Cuomo detailing the points of agreement for the period between September 12, 2008 through January 16, 2009.

Cuomo has been investigating whether material information was withheld from shareholders prior to the Merrill deal being finalized. The questions center on what and when Bank of America executives knew about Merrill's mounting losses and the billions in bonuses paid to Merrill employees and why this information wasn't shared with investors.

Some BofA executives deposed by Cuomo said in withholding certain information about the deal, they acted on advice of counsel.

Citing attorney-client privilege the bank had declined to hand over records the attorney general's office believes are critical in determining whether the executives did indeed act on counsel's advice, or did so on their own.

- Reuters and CNBC reporter Mary Thompson contributed to this report