Former BofA CEO Kenneth Lewis Banned from Wall Street

The former top executive of Bank ofrnAmerica (the Bank) was a named party in a settlement between the bank and thernState of New York announced on Wednesday. rnKenneth D. Lewis, who was essentially forced out of the bank’srnchairmanship and then from his position as CEO early in the financial crisis,rnhas been fined and barred from  serving asrnan officer or director of a public company for three years  as part of a $25 million agreement relating tornthe Bank’s 2008 merger with Merrill Lynch & Company.</p

The settlement was announced by thernoffice of Attorney General (AG) Eric T. Schneiderman which alleged that thernBank, Lewis, and the Bank’s former chief financial officer Joe Price, failed torndisclose specific information about mounting losses at Merrill Lynch as thernbank was attempting to merge with that historic Wall Street Firm.   According to the settlement, the executives werernaware that Merrill’s losses were forecast at more than $9 billion but failed torndisclose that information to shareholders prior to a merger vote.   It isrnalso alleged that the two executives misrepresented the impact that the merger wouldrnhave on the Bank’s future earnings. </p

Schneiderman said the barring of Lewis from serving as an officer orrndirector of a public company for three years, as well as the payment of $10rnmillion to the State of New York, represents one of the first successfulrnattempts by law enforcement to hold accountable a CEO or individual at a majorrninstitution since the financial crisis. The Bank will pay Lewis’ portion of thernfine.  The AG said he also intends tornfile a summary judgment motion against Price on April 4.</p

“Since I took office, I’ve acted on the belief that no one, no matter howrnrich or powerful, should escape accountability for their actions – especiallyrnones that caused such damage to shareholders,” Schneiderman said. “Today’srnsettlement demonstrates a major victory in our continued commitment to applyingrnthe law equally to individuals, as well as corporations. I would hope thisrncloses one chapter of our ongoing efforts to ensure the frauds that occurred inrnand around the financial crisis are not forgotten.”</p

The settlement also requires the Bank continue numerous corporate governancernreforms, especially those relating to public filings and acquisition-relatedrnactivities.   The Bank will pay the State $15 million tornreimburse the costs incurred during the course of the AG’s investigation andrnsubsequent litigation of this matter. </p

Despite initially concealing the forecast losses from investors asrnimmaterial, it is alleged that the Bank immediately sought massive financialrnassistance from the federal government, claiming that there had been arn”material adverse change” in Merrill’s financial condition over the previousrnthree months, subsequently manipulating the Treasury into providing an extrarn$20 billion bailout by threatening to back out of the merger without the money.  The Bank continued to conceal Merrill’srnforecast losses until mid-January 2009, when disclosure of Merrill’srnmultibillion dollar fourth quarter losses led to a $50 billion sell-off in thernshares of Bank of America. </p

The Office of the Attorney General’s investigation and prosecution of thernBank and its top executives directly contributed to the settlement last year ofrnsecurities class action litigation arising out of the same facts, withrninvestors and their counsel receiving $2.425 billion in damages. </p

Lewis was with Bank of America from 2001 to 2009 and is largely creditedrnwith building it into one of the nation’s big five banks.  In the run-up to the 2008 financial meltdownrnthe bank also acquired major mortgage lender Countrywide which subsequentlyrncost it billions in loan losses and has resulted in an ongoing marathon ofrnlegal problems.  The merger with MerrillrnLynch was completed on January 1, 2009 and by April Lewis had been ousted asrnchairman.  He retired from the bank atrnthe end of 2009.

All Content Copyright © 2003 – 2009 Brown House Media, Inc. All Rights Reserved.nReproduction in any form without permission of MortgageNewsDaily.com is prohibited.