The banker backlash continues – and in some style.
Thursday afternoon, New York attorney general Andrew Cuomo’s has taken the case against Ken “we’re good at this” Lewis public.
Reuters flashes report Cuomo is charging the former Bank of America CEO in connection with his role in Bank of America’s troublesome acquisition of Merrill Lynch, equating it no less to “a fraud against the American people”.
Which, to put it mildly, is not good news for the ex-BoA boss.
Here are the flashes:
Feb10 RTRS-NEW YORK ATTORNEY GENERAL CUOMO’S OFFICE SAYS CONFERENCE CALL CONCERNS BANK OF AMERICA CORP <BAC.N> ACQUISITION OF MERRILL LYNCH
Feb10 RTRS-NEW YORK ATTORNEY GENERAL CUOMO’S OFFICE ANNOUNCES CIVIL CHARGES AGAINST FORMER BANK OF AMERICA CEO KENNETH LEWIS, FORMER CFO JOE PRICE, AND THE BANK
Feb10 RTRS-NEW YORK ATTORNEY GENERAL CUOMO’S OFFICE SAYS FILES CHARGES UNDER NEW YORK’S MARTIN ACT
Feb10 RTRS-NEW YORK ATTORNEY GENERAL CUOMO’S OFFICE SAYS THE BANK CONCEALED THE FULL EXTENT OF MERRILL’S LOSSES TO SHAREHOLDERS, VIOLATING NEW YORK’S MARTIN ACT
Feb10 RTRS-NEW YORK ATTORNEY GENERAL CUOMO’S OFFICE SAYS BANK SHOULD HAVE DISCLOSED MERRILL’S LOSSES TO SHAREHOLDERS
Feb10 RTRS-NEW YORK ATTORNEY GENERAL CUOMO’S OFFICE SAYS “THE BANK’S MANAGEMENT MISLED ITS SHAREHOLDERS, ITS BOARD, ITS LAWYERS, THE PUBLIC AND THE TAXPAYERS”
Feb10 RTRS-TARP INSPECTOR BAROFSKY, SPEAKING ON CONFERENCE CALL, SAYS IT IS TIME TO HOLD BANK OF AMERICA, LEWIS AND PRICE RESPONSIBLE FOR A “FRAUD AGAINST THE AMERICAN PEOPLE”
Now Cuomo’s stance contrasts markedly with that of the SEC.
Recall, the regulator had reached a $33m settlement with Bank of America over the losses at Merrill Lynch, only to see the deal thrown out by a US district judge, Jed Rakoff – he wanted the SEC to name and shame the individuals responsible.
That was back in November, since when the SEC has expanded its charges against BofA, but again decided not to pursue individuals.
According to the SEC’s proposed complaint, Bank of America executives at various times discussed the firm’s disclosure obligations with internal and external counsel. These executives are not alleged to have deliberately concealed information from counsel or otherwise acted with scienter or intent to mislead. Nor is any counsel alleged to have acted with scienter or intent to mislead. For these reasons, the SEC’s proposed complaint does not seek charges against any individual officers, directors or attorneys. SEC staff has advised the Commission that, after a careful assessment of the evidence and all of the relevant circumstances, it has determined that charges against individuals for their roles in connection with proxy disclosure are not appropriate.
Cuomo obviously feels differently as is now going after Ken and his cronies.
More as we get it.
Update: As one case opens, another closes.
A press release from the SEC:
The Securities and Exchange Commission today filed a motion seeking court approval of a proposed settlement whereby Bank of America will pay $150 million and strengthen its corporate governance and disclosure practices to settle SEC charges that the company failed to properly disclose employee bonuses and financial losses at Merrill Lynch before shareholders approved the merger of the companies in December 2008.
The SEC previously filed two sets of charges in the U.S. District Court for the Southern District of New York alleging Bank of America failed to disclose material information to shareholders prior to their vote to approve the merger with Merrill Lynch. In the first enforcement action on Aug. 3, 2009, the Commission charged Bank of America with failing to disclose, in proxy materials soliciting shareholder votes for approval of the merger, its prior agreement authorizing Merrill to pay year-end bonuses of up to $5.8 billion to its employees prior to the closing of the merger. In the second enforcement action on Jan. 12, 2010, the Commission charged Bank of America with failing to disclose the extraordinary losses that Merrill sustained in October and November 2008.
Now, this agreement, like the last one, has to be approved by Honorable Jed S. Rakoff. And in light of Cuomo’s assault he could well kick this agreement out too.
Anyway, here are the seven remedial undertakings BofA has agreed to implement for a period of three years:
(one and six look the most interesting).
1. Retain an independent auditor to perform an audit of the Bank’s internal disclosure controls, similar to an audit of financial reporting controls currently required by the federal securities laws.
2. Have its Chief Executive and Chief Financial Officers certify that they have reviewed all annual and merger proxy statements.
3. Retain disclosure counsel who will report to, and advise, the Board’s Audit Committee on the Bank’s disclosures, including current and periodic filings and proxy statements.
4. Adopt a “super-independence” standard for all members of the Board’s Compensation Committee that prohibits them from accepting other compensation from the Bank.
5. Maintain a consultant to the Compensation Committee that would also meet super-independence criteria.
6. Provide shareholders with an annual non-binding “say on pay” with respect to executive compensation.
7. Implement and maintain incentive compensation principles and procedures and prominently publish them on Bank of America’s Web site.
Oddly, the SEC ends its statement by thanking Cuomo for his support and co-operation.
Related links:
SEC Seeks Additional Charges Against BofA – WSJ
Judge 3, SEC 0 in Bank of America/Merrill case – FT Alphaville
Judge Rakoff rocks the SEC boat – FT