Cuomo's allegations 'implausible,' ex-CEO says

Jessica M. Karmasek Aug. 23, 2010, 12:13pm


NEW YORK (Legal Newsline) - Former Bank of America Chief Executive Kenneth Lewis has filed what some are calling an "aggressive response" to a civil fraud lawsuit from New York Attorney General Andrew Cuomo.

In a 115-page response to the lawsuit, Lewis denied the charges over the bank's purchase of Merrill Lynch & Co. amid the 2008 financial crisis that he deliberately misled Bank of America shareholders about Merrill Lynch's financial state.

Lewis calls the attorney general and New York gubernatorial candidate's case "implausible" and "an ill-founded attempt to lay blame where it does not belong," according to the Wall Street Journal.

In court filings, Charlotte, N.C.-based Bank of America and the bank's head of consumer banking, Joe Price, also deny the allegations outlined in Cuomo's suit.

Lewis' attorneys are asking a New York court to throw out Cuomo's suit based on various criteria. First, they contend only the Securities and Exchange Commission has the authority to bring charges related to disclosures tied to the merger.

"The facts, when stripped of rhetoric, tell a completely different story from that in the attorney general's complaint," Lewis' attorneys write in the response.

"The bank and its leadership had a vision of the potential strategic benefits of the merger, sought the advice of world-class financial and legal advisors on disclosure and financial issues, followed that advice, and acted in good faith in an attempt to make the best decisions for shareholders.

"The attorney general, having conducted an extensive investigation into this matter, should be aware of these facts, yet his complaint distorts that reality in an ill-founded attempt to lay blame where it does not belong."

The Journal said the former CEO's response signals he doesn't plan to back down.

Lewis' response follows a complaint filed by Cuomo in New York State Supreme Court on Feb. 4. In his suit, Cuomo accused the bank, Lewis and Price, the bank's former chief financial officer, of "duping shareholders and the federal government" to complete the bank's purchase of Merrill Lynch.

The suit contends Bank of America and the executives intentionally hid that Merrill was suffering huge losses so shareholders would approve the deal, then manipulated the federal government into saving the deal with a massive bailout by threatening to back out of the deal unless the bank received billions in taxpayer funds.

The bank eventually received a total of $45 billion in taxpayer aid to support its merger with Merrill and offset its losses through the worst of the recession.

That bailout was repaid in full and with interest last December. Lewis retired from Bank of America on Dec. 31. Brian Moynihan was appointed his successor. And Moynihan appointed Price head of consumer banking in January.

From Legal Newsline: Reach Jessica Karmasek by e-mail at

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