NEW YORK (Legal Newsline) - Attorneys for Bank of America have responded to a letter from New York Attorney General Andrew Cuomo, saying they are disappointed by the tone of it.
Cuomo wrote the company Tuesday, claiming its invocation of the attorney-client privilege is preventing a complete investigation. Cuomo says he has four examples of Bank of America withholding material information from investors about its purchase of Merrill Lynch in December.
"We were extremely surprised and disappointed by the letter for several reasons," the company's attorneys wrote in the letter, obtained by The New York Times.
"We do not understand your office's apparent refusal to meet with Bank of America's counsel and to hear Bank of America and Merrill Lynch's side of the story, including why there is no basis for seeking to invade the attorney-client privilege here.
"(T)he basic premise of the letter is simply wrong. Bank of America has not put at issue the subject matter of any advice of counsel. Nor has Bank of America offered reliance on legal advice as a justificiation for its disclosures."
Cuomo says the company failed to disclose: Merrill Lynch's heavy fourth-quarter losses last year; that the company required a goodwill charge of more than $2 billion associated with subprime mortgage losses; that it had a legal right to terminate the merger eight days after its approval becaue of the losses; and Merrill Lynch's plans to spend $3.6 billion in executive bonuses.
"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," wrote David Markowitz, Cuomo's Investor Protection Bureau chief.
"Accordingly, we request that Bank of America reconsider its decision to prevent this Office from adequately probing these crucial Issues."
Cuomo claims the company is attempting to use attorney-client privilege as both "a sword and a shield."
"The facts of the cascading losses and bonus payments -and the facts of Bank of America's senior executives' knowledge of these events - are straightforward," Markowitz' letter says.
"However, as discussed in detail below, the decision-making process by which Bank of America and its executives decided not to disclose these material facts to Bank of America's shareholders has been hidden from our investigation by Bank of America's repeated invocation of the attorneyclient privilege.
"These invocations have been made even though Bank of America has offered reliance on legal advice as a justification for each of its failures to disclose."
Tuesday, a settlement between an Ohio public pension fund and Merrill Lynch was made final. The company agreed to pay $475 million to resolve allegations information about Merrill Lynch's heavy fourth-quarter losses was withheld.
Bank of America says it has been cooperating fully with several investigations, and that waiving attorney-client privilege is not a "necessary element" of effective voluntary cooperation.
"Bank of America has spent thousands of hours and produced hundreds of thousands of documents in response to the New York Attorney General's requests," the company's attorneys wrote.
"Its senior management has testified before the New York Attorney General, some on multiple occasions. Based on all that evidence, we believe that the proxy statement and the other disclosures complied with all applicable laws, rules and regulations.
From Legal Newsline: Reach John O'Brien by e-mail at email@example.com.