Ex Bank Of America CEO Charged With Fraud
Man, when it’s time to pile on…
On Thursday the Attorney General of New York, Andrew Cuomo, who might be running for governor of the state later in the year, charged former CEO Ken Lewis with fraud as it regards Bank of America’s purchase of Merrill Lynch at a time when the banking industry was in trouble, and B of A was near the top of that list.
In essence, the lawsuit believes that B of A made the purchase at that time because they knew the government might be able to bail them out of any financial difficulties, in essence using the government’s money to help them fund the purchase so they could then pay out big bonuses to former Merrill Lynch employees. It also claims figures were fudged that didn’t show in full just how bad a footing Merrill Lynch had financially, and some other improprieties.
This is something different for the Attorney General, who usually goes after corporations for bad behavior committed in New York, where Bank of America’s offices are located. This is a civil lawsuit, which means that Lewis won’t have the benefit of corporate lawyers, ergo unlimited funds, to help his case.
This blog wasn’t up when all of that was going on, but I had wondered at the time what B of A could be thinking in absorbing Merrill Lynch when everyone knew they were in trouble themselves. The idea of adding someone else who’d in financial trouble just didn’t make much sense, and pretty quickly after it was all done, Lewis resigned. It all looked suspect, but legal at the time.
Of course, Bank of America doesn’t totally get off the hook here. While the present CEO has no liabilities thrown upon him, they will have to pay $150 million to their shareholders because of the previous false information, along with some other changes as it regards shareholders and their rights as voting members. Supposedly, they had initially told the shareholders that no bonuses would be paid out to Merrill employees.
The big banks just keep digging bigger and bigger holes for themselves. Is it any wonder that we’re leery of them?