NEW YORK (Legal Newsline) - After months of toying with the idea, New York Attorney General Andrew Cuomo on Thursday filed a lawsuit against Bank of America regarding its merger with Merrill Lynch.
His lawsuit came on the same day the federal Securities and Exchange Commission and North Carolina Attorney General Roy Cooper reached a settlement in their suit against Bank of America.
In addition to misleading shareholders, Cuomo says former CEO Kenneth Lewis and former CFO Joseph Price duped the federal government into giving Bank of America Troubled Asset Relief Program funds.
"This merger is a classic example of how the actions of our nation's largest financial institutions led to the near-collapse of our financial system," Cuomo said.
"Bank of America, through its top management, engaged in a concerted effort to deceive shareholders and American taxpayers at large. This was an arrogant scheme hatched by the bank's top executives who believed they could play by their own set of rules.
"In the end, they committed an enormous fraud and American taxpayers ended up paying billions for Bank of America's misdeeds."
Bank of America will pay a $150 million civil penalty that will be distributed to shareholders as a result of the agreement with the SEC and $1 million to Cooper's office for consumer protection purposes.
Cuomo and Bank of America briefly tussled over attorney-client privilege issues during Cuomo's investigation last year.
Two Ohio pension funds and a Texas pension fund are among the five lead plaintiffs appointed by the U.S. District Court for the Southern District of New York who recently filed a consolidated complaint against Bank of America.
Their complaint charges that the company did not disclose billions of dollars in losses by Merrill Lynch or Lynch's plan to give billions in executive bonuses after the January merger
The class action suit says Bank of America agreed to allow Merrill Lynch to pay up to $5.8 billion in executive bonuses after the merger but did not tell its shareholders. Merrill Lynch ended up paying out $3.6 billion in executive bonuses.
Bank of America did not warn its shareholders of Merrill Lynch's heavy losses during the fourth quarter of 2008, though Bank of America's executives knew of them, the complaint said.
After a shareholder vote, Bank of America continued to withhold the information, the complaint said.
Cuomo's lawsuit goes a little further.
He says Lewis misled federal regulators when he said the company could not complete the merger without bailout funds because of Merrill Lynch's losses.
Bank of America received more than $20 billion of federal funds.
From Legal Newsline: Reach John O'Brien by e-mail at firstname.lastname@example.org.