Legal News

Ken Lewis Knew: SEC Shows Deposition of Former BofA Chief

By Amir Efrati

Merrill Lynch Chairman and CEO John Thain, left, and Bank of America Chairman and CEO Ken Lewis announce the merger, Sept. 15, 2008. (AP)

BacMerSaga keeps giving and giving.

The investigations into Bank of America’s lack of disclosure about mounting losses at Merrill Lynch before the two merged in 2008 have always centered on what then-BofA CEO Ken Lewis knew and what he did with that knowledge.

On Thursday our knees got weak when we got some answers to those questions.

According to a court filing, Lewis told the Securities and Exchange Commission that he was briefed twice about legal decisions not to disclose ballooning losses at Merrill before shareholders approved the securities firm’s takeover. Here’s the WSJ story.

That’s the first known acknowledgment by Lewis that he had such knowledge, and he made it during an October 2009 deposition taken by the SEC.

The SEC’s court filing on Thursday is part of Judge Jed Rakoff’s review of a proposed $150 million settlement between the SEC and BofA over the disclosure issue. The SEC said it didn’t have enough evidence to charge any individuals with securities violations.

According to WSJ, the Lewis acknowledgment could bolster a claim made by New York Attorney General Andrew Cuomo, who separately sued him last month for allegedly committing securities fraud by not disclosing the rising losses to shareholders before the merger vote.

Mary Jo White of Debevoise, a lawyer for Lewis, told WSJ that Lewis did nothing wrong. “Mr. Lewis learned prior to the shareholder vote of the advice from expert legal counsel that no additional disclosure regarding Merrill’s financial condition was warranted, and the bank followed that advice,” she said.

According to the deposition, Lewis told the SEC that BofA’s then-finance chief had informed him that no disclosure was necessary, based on the opinion of BofA’s legal counsel.

Lewis said in the deposition that he had no opinion about whether investors should have been told about Merrill’s losses before the shareholder vote.

Full post as published by Law Blog - WSJ.com on February 19, 2010 (boomark / email).