New York attorney general sues BofA, former CEO

The New York attorney general has filed a lawsuit against the Bank of America and its two former top honchos, including CEO Kenneth Lewis, for duping shareholders and the US government to complete a merger with Merrill Lynch.

Attorney general Andrew M Cuomo has also sued BofA's former CFO Joseph L Price. "Bank of America's management intentionally failed to disclose massive losses at Merrill so that shareholders would vote to approve the merger.

"Once the deal was approved, Bank of America's management manipulated the federal government into saving the deal with billions in taxpayer funds by falsely claiming that they would back out of the deal without bailout funds," Cuomo has alleged in his lawsuit announced on Thursday.

BofA announced its plan to buy Merrill Lynch in September 2008. By the time of shareholders' approval for the deal in December the same year, Merrill Lynch had run into losses of over $16 billion.

According to the attorney general, BofA's top management, including Lewis and Price, knew about the massive losses but did not disclose the information so that shareholders would approve the merger.

After the shareholders' nod, "Lewis then misled Federal regulators by telling them that the bank could not complete the merger without an extraordinary taxpayer bailout due to accelerated losses from Merrill," he noted in a statement.

The US government had pumped in $20 billion into BofA.

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

"In the end, they committed an enormous fraud and American taxpayers ended up paying billions for Bank of America's misdeeds," Cuomo pointed out.

The details of the lawsuit, filed in the New York State Supreme Court, was announced by Cuomo and Troubled Asset Relief Programme special inspector general Neil Barofsky. BofA, one of the worst hit by the financial meltdown, was also caught in a bonus controversy at Merrill Lynch.

The attorney general noted that BofA's management failed to tell shareholders that it was allowing Merrill to pay $3.57 billion in bonuses.

"In the process of acquiring Merrill Lynch, Bank of Americas management intentionally misled shareholders, board of directors, lawyers, and US taxpayers," he added.

The Securities and Exchange Commission said on Thursday it has reached a litigation settlement with BofA, whereby the bank would pay $150 million to the regulator.

In addition, the bank would strengthen its corporate governance and disclosure practices to settle SEC charges that it failed to properly disclose employee bonuses and financial losses at Merrill Lynch before shareholders approved the merger of the companies in December 2008.