NEW YORK/ORLANDO, Florida--New York's attorney general charged Bank of America Corp, former Chief Executive Kenneth Lewis and former Chief Financial Officer Joe Price with fraud for allegedly misleading shareholders about the acquisition of Merrill Lynch & Co.
The U.S. Securities and Exchange Commission separately said Bank of America agreed to pay a $150 million civil fine and bolster disclosure and governance practices to settle its two lawsuits alleging poor disclosure of Merrill's losses and $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 U.S. bank. Moynihan replaced Lewis, who retired under pressure at the end of 2009 after four decades at the bank.
Lewis, 62, joins Countrywide Financial Corp's Angelo Mozilo among major U.S. 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 criticized Bank of America for failing to scrutinize 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 Dec. 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 $15.8 billion in the fourth quarter of 2008, but Cuomo said just $1.4 billion surfaced between Dec. 5 and when Bank of America began to raise alarm bells in Washington. "The behavior is just egregious and reprehensible," Cuomo said on a conference call with reporters.
Bank of America took $20 billion of bailout money from the federal government's Troubled Asset Relief Program to help absorb Merrill. It has since repaid that sum.
