This morning, just as Bank of America finally stood up, bloody and beaten, from the epic smackdown given to them by Judge Jed Rakoff this summer (the bank had proposed paying $33 million to the SEC for misusing shareholders' money in the acquisition of Merrill Lynch, but the judge ruled that using shareholders' money to settle a case in which they were accused of misusing shareholders' money was "absurd") and delivered a new plan that involves actually distributing shareholder money to shareholders, Attorney General Andrew Cuomo sneaked up and knocked them on the back of the head with his giant thesaurus.
Well. Not literally. The Bonus Buster slapped the bank, and its former chief executive Ken Lewis and former chief financial officer Joe Price, with a 90-page lawsuit accusing them of defrauding investors by acquiring Merrill Lynch, which he claims they knew was bleeding money. As you can imagine, the attorney general did not hold back with the verbiage:
This merger has, in many ways, become a classic example of how the modus operandi of our nation’s largest financial institutions led to the near collapse of our financial system. In order to complete its deal, Bank of America’s management misled its shareholders by not disclosing massive losses that were mounting at Merrill Lynch so that the shareholders would vote to approve the deal. Once the deal was approved, Bank of America’s management manipulated the federal government into saving the deal with billions in taxpayer funds by falsely claiming that they intended to back out of the deal through a clause in the merger agreement. Ultimately, this was an enormous fraud on taxpayers who ended up paying billions for Bank of America’s misdeeds.
Throughout this episode, the conduct of Bank of America, through its top management, was motivated by self-interest, greed, hubris and a palpable sense that the normal rules of fair play did not apply to them.
God, if only someone would ever say what they really think in these things instead of wrapping it up in all kinds of jargon. For their part, Bank of America has issued a statement saying they are "disappointed" in the charges and that they believe them to be "totally without merit." Ken Lewis's lawyer went one further.
“The decision by Mr. Cuomo to sue Bank of America, Mr. Lewis and other executives in connection with BofA’s acquisition of Merrill Lynch is a badly misguided decision without support in the facts or the law,” said Mary Jo White of Debevoise & Plimpton LLP in New York, who represents Lewis. “There is not a shred of objective evidence to support the allegations by the Attorney General.”
Cuomo Sues BofA and Lewis; S.E.C. Proposes New Settlement [DealBook/NYT]
Ken Lewis, Bank of America Sued by Cuomo for Fraud [Bloomberg]