Bank of America Corp. and former Chief Executive Kenneth Lewis denied civil fraud charges brought by New York’s attorney general over the bank’s takeover of Merrill Lynch & Co. amid the 2008 financial crisis.
In court papers filed Wednesday, Lewis said the state’s prosecutor Andrew Cuomo had no basis in his lawsuit to allege a conspiracy to mislead the public and shareholders about Merrill’s deteriorating finances and Bank of America’s desire for government assistance.“Some have looked to assign blame for every aspect of the financial crisis, even where there is no evidence of misconduct,” Lewis said.
He said “this case is a product of that dynamic,” and Cuomo’s version of events is “inconsistent, selectively presented, and often nonsensical.”
Lewis and former Chief Financial Officer Joseph Price, who is also a defendant, urged dismissal of the lawsuit, filed with the New York State Supreme Court in Manhattan.
Bank of America filed its own papers saying Cuomo had failed to state a claim warranting relief.
The denials had been expected and in response, the prosecutor’s spokesman, Richard Bamberger, said the Attorney General’s office “stands by the allegations set forth in its Complaint” and the defendant’s filings “do nothing to change this office’s view of the case.”
The takeover of Merrill was a signature event in the 2008 financial crisis. It was announced Sept. 15, the same day Lehman Brothers Holdings Inc. went bankrupt.
Lewis was initially praised for saving Merrill, but later he faced a storm of criticism over the alleged failure to make a timely disclosure of Merrill’s soaring losses, even as Merrill was paying out $3.6 billion of bonuses.
The merger closed Jan. 1, 2009. A year later, Lewis ended his 40-year career at Bank of America, whose shares remain roughly 60 percent below where they traded before the deal was announced. Many other bank shares also suffered steep declines.
Cuomo accused the defendants of intentionally failing to disclose massive losses at Merrill before a Dec. 5, 2008, shareholder vote on the merger.
He also alleged that the defendants later misled the federal government in arguing that a “surprise” increase in Merrill’s losses allowed the bank to back out of the merger unless it received massive taxpayer help.
While Merrill lost $15.8 billion in the fourth quarter of 2008, Cuomo said just $1.4 billion of losses surfaced between the shareholder vote and Bank of America’s urgent plea to Washington for help.
In its filing, Charlotte, N.C.-based Bank of America said it “acted at all times in good faith and without any fraudulent intent.”
Price said he acted “in what he justifiably believed to be the best interests of the bank and its shareholders and in compliance with every rule of law and fair play.”
Merrill’s results in recent quarters have helped Bank of America offset elevated consumer credit losses. Lewis called the takeover “an unmitigated financial and strategic success.”
Cuomo sued Feb. 4, 2010, the day Bank of America reached a $150 million accord with the Securities and Exchange Commission settling charges that the bank failed to disclose Merrill losses and bonuses.
Brian Moynihan succeeded Lewis as Bank of America CEO Jan. 1, 2010. Price now oversees consumer and small business banking at the bank.
In afternoon trading, Bank of America shares were down 19 cents, or 1.5 percent, at $12.83 on the New York Stock Exchange.
The case is Cuomo v. Bank of America Corp et al, New York State Supreme Court, New York County, No. 450115/2010.
