Former BofA CEO Ken Lewis banned as public co. officer
Former Bank of America chief executive Kenneth Lewis was banned by New York Wednesday from serving as a public company official over the financial institution's costly takeover of Merrill Lynch.
Lewis was forbidden by the New York attorney general from acting as an officer or director of a public company for three years for pushing the takeover even as he knew Merrill faced losses of $9 billion, a fact not disclosed to Bank of America shareholders.
Lewis was ordered to pay New York $10 million, and Bank of America agreed to pay another $15 million in the case.
The settlement "represents one of the first successful attempts by law enforcement to hold accountable a CEO or individual at a major institution since the financial crisis," the attorney general's office said in a statement.
Lewis led the bank when, in an extremely rapidly conceived and executed deal, Bank of America took over the investment bank as it was on the verge of collapse.
BofA paid some $50 billion in the deal, which further weakened it in the crisis and sent its shares plummeting when Merrill's losses were revealed months later.
"Despite concealing these forecasted losses from investors as immaterial, the bank then immediately sought massive financial assistance from the federal government, claiming that there had been a 'material adverse change' in Merrill's financial condition over the previous three months."
"Bank of America continued to conceal Merrill's forecasted losses until mid-January 2009, when disclosure of Merrill's multibillion dollar fourth quarter losses led to a $50 billion sell-off in the shares of Bank of America."
Eventually, the bank was forced to pay shareholders $2.4 billion to settle a class action lawsuit.
Lewis' lawyer Bruce Yannett on Wednesday defended the Merrill Lynch takeover and Lewis's actions.
"Mr. Lewis is proud of the role he played in helping the US banking system survive a very challenging period in its history," he said in a statement.
"Mr. Lewis consistently has made clear that the Bank relied on experienced legal counsel ... with regard to what needed to be disclosed to shareholders."
"The Merrill Lynch acquisition has since proven to be an unmitigated success for Bank of America and its stockholders."