Bank of America Corp. (BAC) and its ex-CEO Kenneth Lewis have consented to pay $25 million to settle the remaining big securities fraud case accusing them of misleading investors about the financial state of Merrill Lynch & Co. during the 2008 financial crisis. The New York securities case accuses the bank of deceiving shareholders by not disclosing Merrill’s increasing losses before the acquisition deal was closed or letting them know that the deal let Merrill give its officials billions of dollars in awards.
As part of the settlement, the bank will pay the state of New York $15 million and it will enhance its oversight. Lewis, meantime, has consented to pay $10 million and he cannot work at or serve as a director of any public company for three years.
Also named as a defendant in the securities lawsuit but who refused to settle is ex-Bank of America CFO Joe Price. NY Attorney General Eric Schneiderman intends to pursue a summary judgment against him, as well as ask a judge to reach a decision without a trial. Schneiderman reportedly wants Price permanently banned from serving as a director or working at a public company.
Previously, Lewis and other Bank of America directors agreed to pay $20 million to settle a securities fraud lawsuit by investors accusing them of not disclosing needed data about Merrill before the takeover was approved. In 2012, the bank consented to pay $2.43 billion to resolve a class-action securities case with investors accusing the institution and its officers of making misleading and false statements about Merrill’s financial health. Just two year before that Bank of America agreed to pay $150 million to settle with the SEC over charges that it did not disclose material data about Merrill.
Bank of America acquired Merrill in a $50 billion deal in September 2008, which is when Lehman Brothers Holdings went into bankruptcy. While the deal was at first considered good news, especially as the rest of Wall Street appeared to be in so much trouble, analysts started to wonder if Lewis paid too much. There was also Merrill’s losses right before the acquisition was finalized.
Because of investors’ fears about the financial crisis, share prices of Bank of America dropped significantly, causing the value of the deal to drop to about $19 billion by the time it actually was finalized in January 2009. Securities fraud lawsuits then followed.
Bank of America’s decisions to purchase Merrill and Countrywide Financial Corp. have since compelled it to put aside over $42 billion to cover lawsuit costs, reserves, and payouts. Many of the securities cases contend that Countrywide, once one of the biggest subprime mortgage lenders, sold faulty mortgage securities to investors leading up to the 2008 economic crisis.
In October, a jury found Bank of America liable for securities fraud over the mortgages that Countrywide originated as home loans that in then sold to Freddie Mac and Fannie Mae.
Please contact our stockbroker fraud lawyers if you suspect your investment losses are because of financial fraud.
Lewis, BofA Reach $25 Million Pact With N.Y. Over Merrill, Bloomberg, March 26, 2014
Bank of America to pay $2.43B in settlement, Yahoo, September 28, 2012
Bank of America liable for Countrywide mortgage fraud, Reuters, October 23, 2008
More Blog Posts:
$500M MBS Settlement Reached Between Countrywide and Investors, Stockbroker Fraud Blog, May 10, 2013
Dismissal of Double Derivative Delaware Securities Lawsuits Over The Bank of America-Merrill Lynch Merger is Affirmed by the Second Circuit, Stockbroker Fraud Blog, December 22, 2012
Bank of America Settles Mortgage Bond Claims with FHFA for $9.3B, Institutional Investor Securities Blog, March 29, 2014