Merrill scandal is not over yet, BofA is threatened by Cuomo

image According to Reuters, New York Attorney General Andrew Cuomo threatened in Tuesday’s letter to file charges accusing top Bank of America Corp executives of withholding essential details about its takeover of Merrill Lynch & Co. Besides, Cuomo’s office also contended that executives were so worried about Merrill’s swelling losses that they “sought guidance” prior to a December 5, 2008 shareholder vote on the merger over whether the bank could back out.

The Charlotte, North Carolina-based bank has said it threatened invoking its contractual right to back out following the shareholder vote, but went through with the merger under regulatory pressure. The bank was given until September 14 to disclose the information to Cuomo or else “individual Bank of America officers” could be charged.

Moreover, 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. The civil settlement has been twice rejected by U.S. District Judge Jed Rakoff, who 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. Meanwhile, Scott Silvestri, Bank of America spokesman, said that the bank has not asserted an “advice of counsel” defense, and has maintained that its disclosures complied with applicable law.

Cuomo accused Bank of America of failing to disclose information on its right to back out of the merger; the bonus payments; Merrill’s $15.8 billion fourth-quarter loss and a more than $2 billion write-down for subprime mortgages. 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.

In addition, Rakoff has also 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.

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