Bank of America: Oh F&$K, This Cuomo Dude Is Serious
Fedgate seems to be over but Bank of America's Merrill headache is nowhere near resolved. While I certainly promote further investigation into the matter, I'm not sure it's entirely fair to absolve Bernaulson and put the remainder of the blame on BAC management. Just sayin.
New York Attorney General Andrew Cuomo threatened to file charges on Tuesday accusing top Bank of America Corp executives of failing to disclose essential details about its takeover of Merrill Lynch & Co.
In a letter to the largest U.S. bank, Cuomo's office said Bank of America cannot hide behind attorney-client privilege without revealing the substance of its lawyers' advice.
"The law is clear that Bank of America and its officers cannot assert an advice of counsel defense for their decisions, and at the same time persist in refusing to disclose the substance of the conversations with counsel," wrote David Markowitz, chief of Cuomo's investor protection bureau.
The Charlotte, North Carolina-based bank was given until September 14 to disclose the information to Cuomo or else "individual Bank of America officers" could be charged.
Cuomo's threat could complicate the bank's efforts to cement its $33 million settlement with the U.S. Securities and Exchange Commission over charges it failed to properly disclose it authorized Merrill to pay $3.6 billion of bonuses.
U.S. District Judge Jed Rakoff has twice rejected the civil settlement, and ordered Bank of America and the SEC to make new submissions by Wednesday.
Chief Executive Kenneth Lewis and other executives have said they relied on counsel for decisions not to disclose some information about the merger, which closed on Jan 1. Greater disclosures could add fuel to some of the many investor lawsuits over the merger.
Wow those are some awfully vicious allegations.
In Tuesday's letter, Cuomo accused Bank of America of withholding information on the bonus payments; Merrill's $15.8 billion fourth-quarter loss; a more than $2 billion write-down for subprime mortgages; and the bank's determination that it had, but would not invoke a contractual right to back out of the merger.
He accused the executives of using attorney-client privilege as a sword and a shield: by saying they relied on lawyers for their decisions, but then invoking the privilege to prevent investigators from determining who decided what.
"We cannot simply accept Bank of America's officers' naked assertions that they sought and relied on advice of counsel in good faith, and that, therefore, they should not be charged," Markowitz wrote.
Rakoff, too, has faulted the SEC for appearing to let the bank off too easily, and dismissed as nonsensical why Bank of America would agree to the $33 million penalty without admitting it had done anything wrong.
FAIL, FAIL, FAIL and FAIL some more. BAC has a long way to go before it may consider its sins fully absolved in a court of law, here's to hoping Ken Lewis has said his Hail Marys.