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Bank of America’s ex-CEO charged with fraud
February 5, 2010 by admin
Reuters, 5 February 2010
New York’s attorney general charged Bank of America’s former chief executive Kenneth Lewis and former chief financial officer Joe Price with fraud for allegedly misleading shareholders about the acquisition of Merrill Lynch.
The US Securities and Exchange Commission separately said Bank of America agreed to pay a US$150 million civil fine and bolster disclosure and governance practices to settle its two lawsuits alleging poor disclosure of Merrill’s losses and US$3.6 billion of bonus payouts. That accord requires court approval.
Thursday’s civil lawsuit by New York Attorney General Andrew Cuomo could complicate efforts by new Bank of America CEO Brian Moynihan to revive the largest US bank.
Moynihan replaced Lewis, who retired under pressure at the end of last year after four decades at the bank.
Lewis, 62, joins Countrywide Financial Corp’s Angelo Mozilo among major US financial services chief executives to face civil regulatory fraud charges over conduct since a global credit crisis began in the middle of 2007.
Separately, Senator Carl Levin criticised Bank of America for failing to scrutinise questionable accounts by a notorious arms dealer and flag them for possible money laundering.
Cuomo, invoking a powerful state law used to combat securities fraud, accused Bank of America, Lewis and Price of intentionally failing to disclose massive losses at Merrill prior to a December 5, 2008 shareholder vote on the merger.
Cuomo also alleged that the defendants later misled the federal government in arguing that a “surprise” increase in Merrill’s losses would allow Bank of America to back out of the merger if it did not get massive taxpayer help.
His lawsuit seeks unspecified monetary damages and other remedies.
Merrill lost US$15.8 billion in the fourth quarter of 2008, but Cuomo said just US$1.4 billion surfaced between December 5 and when Bank of America began to raise alarm bells in Washington.
“The behaviour is just egregious and reprehensible,” Cuomo said on a conference call with reporters.
Bank of America took US$20 billion of bailout money from the federal government’s Troubled Asset Relief Program (Tarp) to help absorb Merrill. It has since repaid that sum.
“Change is so obviously needed at Bank of America,” said Neil Barofsky, the Tarp special inspector general, on the conference call.
Price remains at the bank, and was last month named head of consumer, small business and card banking.
David Markowitz, who heads Cuomo’s investor protection bureau, said Moynihan is not under investigation.
Cuomo filed the charges under the Martin Act, a New York law giving him extraordinary power in securities litigation and fighting financial fraud. The law dates from 1921, more than a decade before the SEC was created.
Bob Stickler, a Bank of America spokesman, called Cuomo’s charges “regrettable” and without merit.
“The evidence demonstrates that Bank of America and its executives, including Ken Lewis and Joe Price, at all times acted in good faith and consistent with their legal and fiduciary obligations,” he said. – Reuters
February 5, 2010 by admin
Reuters, 5 February 2010
New York’s attorney general charged Bank of America’s former chief executive Kenneth Lewis and former chief financial officer Joe Price with fraud for allegedly misleading shareholders about the acquisition of Merrill Lynch.
The US Securities and Exchange Commission separately said Bank of America agreed to pay a US$150 million civil fine and bolster disclosure and governance practices to settle its two lawsuits alleging poor disclosure of Merrill’s losses and US$3.6 billion of bonus payouts. That accord requires court approval.
Thursday’s civil lawsuit by New York Attorney General Andrew Cuomo could complicate efforts by new Bank of America CEO Brian Moynihan to revive the largest US bank.
Moynihan replaced Lewis, who retired under pressure at the end of last year after four decades at the bank.
Lewis, 62, joins Countrywide Financial Corp’s Angelo Mozilo among major US financial services chief executives to face civil regulatory fraud charges over conduct since a global credit crisis began in the middle of 2007.
Separately, Senator Carl Levin criticised Bank of America for failing to scrutinise questionable accounts by a notorious arms dealer and flag them for possible money laundering.
Cuomo, invoking a powerful state law used to combat securities fraud, accused Bank of America, Lewis and Price of intentionally failing to disclose massive losses at Merrill prior to a December 5, 2008 shareholder vote on the merger.
Cuomo also alleged that the defendants later misled the federal government in arguing that a “surprise” increase in Merrill’s losses would allow Bank of America to back out of the merger if it did not get massive taxpayer help.
His lawsuit seeks unspecified monetary damages and other remedies.
Merrill lost US$15.8 billion in the fourth quarter of 2008, but Cuomo said just US$1.4 billion surfaced between December 5 and when Bank of America began to raise alarm bells in Washington.
“The behaviour is just egregious and reprehensible,” Cuomo said on a conference call with reporters.
Bank of America took US$20 billion of bailout money from the federal government’s Troubled Asset Relief Program (Tarp) to help absorb Merrill. It has since repaid that sum.
“Change is so obviously needed at Bank of America,” said Neil Barofsky, the Tarp special inspector general, on the conference call.
Price remains at the bank, and was last month named head of consumer, small business and card banking.
David Markowitz, who heads Cuomo’s investor protection bureau, said Moynihan is not under investigation.
Cuomo filed the charges under the Martin Act, a New York law giving him extraordinary power in securities litigation and fighting financial fraud. The law dates from 1921, more than a decade before the SEC was created.
Bob Stickler, a Bank of America spokesman, called Cuomo’s charges “regrettable” and without merit.
“The evidence demonstrates that Bank of America and its executives, including Ken Lewis and Joe Price, at all times acted in good faith and consistent with their legal and fiduciary obligations,” he said. – Reuters
