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Pair of op-eds criticize Cuomo's Bank of America suit

By John O'Brien | Feb 16, 2010


NEW YORK (Legal Newsline) - More editorials are questioning the merits of New York Attorney General Andrew Cuomo's recently filed lawsuit against Bank of America.

Tuesday, an editorial in the National Review Online called the case "questionable," while the Washington Post noted that the federal Securities and Exchange Commission is already dealing with the issue and recently reached a $150 million settlement with Bank of America.

The charges against the company are that it misled investors about the financial state of Merrill Lynch during the companies' merger and Merrill Lynch's plan to spend millions of dollars on executive bonuses.

Cuomo added in his complaint, filed Feb. 4, that Bank of America's former CEO Kenneth Lewis and former CFO Joseph Price duped the federal government into giving it Troubled Asset Relief Program funds.

"We're not saying that Mr. Cuomo can't prove his case under the Martin Act. His unforgiving interpretation of Bank of America's behavior is plausible -- just as one could look at the facts and plausibly conclude that Mr. Cuomo is bashing a bank to further his campaign for governor," the Post wrote Monday in an editorial titled "No Good Deed."

"The question is what public interest this lawsuit really serves. Even if Bank of America did ram a bad deal past its shareholders, the SEC is dealing with the matter, supervised by a federal judge, Jed S. Rakoff, who seems determined to hold the firm fully accountable.

"Meanwhile, Mr. Lewis and Mr. Price have lost their jobs, Bank of America has repaid its federal bailout with interest, and Merrill Lynch is back in the black."

Marie Gryphon's piece in the NRO critiques the claims made by Cuomo in his lawsuit.

"Cuomo requests attorneys fees for his office as well as injunctive relief amounting to a stern warning to the defendants not to mislead shareholders and the federal government about multi-billion-dollar losses suffered by a merger partner in the midst of an unprecedented financial crisis ever again. Done, and done!" wrote Gryphon, a senior fellow at the Manhattan Institute.

"Other than these items, it is not clear that much relief is due. Fraud statutes authorize the disgorgement of ill-gotten gains, but Bank of America has already repaid all of its TARP money with interest, and Lewis and Price were not enriched by the merger, which ruined their reputations and cost them their jobs."

Cuomo said Bank of America's actions are "a classic example of how the actions of our nation's largest financial institutions led to the near-collapse of our financial system."

"Bank of America, through its top management, engaged in a concerted effort to deceive shareholders and American taxpayers at large," he added. "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."

The Wall Street Journal was the first to criticize Cuomo, probing his record as secretary of the Department of Housing and Urban Development from 1997-2001.

While at the HUD, Cuomo required Fannie Mae and Freddie Mac to buy $2.4 trillion in mortgages over a 10-year span. Cuomo said that meant affordable housing for 28.1 million low- and moderate-income families.

"Fannie and Freddie's purchases of subprime loans skyrocketed," the editorial says.

"The problem wasn't merely that the Cuomo HUD was raising the volume of loans for which taxpayers would be on the hook. It was also encouraging a dangerous decline in underwriting standards at these government-sponsored enterprises "

From Legal Newsline: Reach John O'Brien by e-mail at jobrienwv@gmail.com.

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