Bank of America, former CEO charged with fraud (Roundup)

Feb 4, 2010, 18:28 GMT

New York - Bank of America and its former chief executive Kenneth Lewis have been charged with fraud over the controversial takeover of rival Merrill Lynch at the height of the financial crisis, New York Attorney General Andrew Cuomo said Thursday.

The lawsuit alleges that Bank of America's top management purposely concealed massive losses at Merrill from shareholders, in order to get the merger approved at a December 2008 vote.

Lewis then allegedly misled the government into believing the deal needed billions of dollars in taxpayer support to avoid a wholesale collapse of Bank of America.

'Bank of America, through its top management, engaged in a concerted effort to deceive shareholders and American taxpayers at large,' Cuomo said in a statement.

The lawsuit, filed with the New York State Supreme Court, was brought against Lewis and former chief financial officer Joseph Price and seeks 'monetary relief' stemming from the fraud.

Separately, Bank of America agreed Thursday to pay 150 million dollars to settle lawsuits brought by the federal government's Securities and Exchange Commission (SEC). The SEC case involved similar charges that it failed to disclose bonuses and losses at Merrill.

Bank of America in a statement said it was 'pleased' to have reached a settlement with the SEC, though the deal must still be approved by a court in New York, and promised to improve disclosure practices. It did not comment on the latest lawsuit filed by Cuomo.

The Bank of America-Merrill merger deal was reached in September 2008 as Wall Street stood on the brink of collapse. Cuomo's lawsuit alleges Lewis and Price hid from shareholders more than 16 billion dollars in losses racked up by Merrill in October and November.

Those losses meant the merger would put Bank of America itself in danger of collapse and it likely would never have been approved by shareholders in December. Following the vote, Cuomo alleges that Lewis then turned to the government for more than 20 billion dollars in emergency loans.