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New York AG sues Bank of America for misleading shareholders

[JURIST] The New York Office of the Attorney General [official website] on Wednesday filed civil charges [complaint] against Bank of America (BOA) [corporate website], former CEO Ken Lewis, and former CFO Joseph Price, alleging that the bank misled investors in order to acquire financial firm Merrill Lynch [corporate website]. The complaint alleges that Merrill Lynch had significant losses in the months leading up to a shareholder vote on the merger and that Lewis and Price violated the New York Martin Act [WLF backgrounder, PDF] because they knew of the losses but failed to disclose them to shareholders before the vote. The complaint criticized BOA and its executives, stating:

This merger has, in many ways, become a classic example of how the modus operandi of our nation's largest financial institutions led to the near collapse of our financial system. ... Ultimately, this was an enormous fraud on taxpayers who ended up paying billions for BOA's misdeeds. Throughout this episode, the conduct of Bank of America, through its top management, was motivated by self-interest, greed, hubris, and a palpable sense that the normal rules of fair play did not apply to them. Bank of America's management thought of itself as too big to play by the rules and, just as disturbingly, too big to tell the truth.

New York Attorney General Andrew Cuomo [JURIST news archive] further criticized [press release] the firm saying the merger was an example of the type of behavior that nearly destroyed the US financial system.

The lawsuit comes less than a month after the US Securities and Exchange Commission (SEC) [official website] filed federal charges [JURIST report] against BOA related to the undisclosed losses. Also in January, US President Barack Obama proposed new banking rules [JURIST report] that he claimed would stabilize the banking system and reduce the risk of future bank failures. In September, a judge for the US District Court for the Southern District of New York [official website] rejected a $33 million settlement agreement between the SEC and BOA over misleading investors regarding billions of dollars paid to Merrill Lynch executives during the merger.

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