New York AG Filing Civil Charges Against BofA Over Merrill

Getty Images

Bank of America flag

The New York Attorney General's office is filing civil charges against Bank of America and its former CEO Ken Lewis, saying the bank misled investors about Merrill Lynch when it acquired the Wall Street bank in late 2008.

Civil charges were also being filed against Joe Price, the bank's former chief financial officer.

Lewis stepped down from Bank of America on Dec. 31 after almost a year of strife that followed the bank's purchase of Merrill Lynch.

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.

An attorney for Price told Reuters the allegations are "utterly false," while Lewis' lawyer said "there is not a shred of evidence" to support the attorney general's allegations.

Meanwhile, the Securities and Exchange Commission filed a motion Thursday seeking court approval of a proposed settlement where Bank of America will pay $150 million to settle SEC charges that the company failed to properly disclose employee bonuses and financial losses at Merrill Lynch before shareholders approved the merger of the companies in December 2008.

The SEC previously filed two sets of charges in the U.S. District Court for the Southern District of New York alleging Bank of America failed to disclose material information to shareholders prior to their vote to approve the merger with Merrill Lynch.

In the first enforcement action on Aug. 3, 2009, the Commission charged Bank of America with failing to disclose, in proxy materials soliciting shareholder votes for approval of the merger, its prior agreement authorizing Merrill to pay year-end bonuses of up to $5.8 billion to its employees prior to the closing of the merger.

In the second enforcement action on Jan. 12, 2010, the Commission charged Bank of America with failing to disclose the extraordinary losses that Merrill sustained in October and November 2008.

Under the terms of the proposed settlement, which are subject to approval by the Honorable Jed S. Rakoff, the $150 million penalty will be distributed to Bank of America shareholders harmed by the Bank’s alleged disclosure violations. The Commission will propose a distribution plan at a later date.