N.Y. charges BofA in Merrill purchase

NEW YORK - The New York Attorney General's Office said yesterday that it had filed civil charges against Bank of America Corp. and former chief executive officer Ken Lewis, saying the bank misled investors about the finances of Merrill Lynch & Co. Inc. before the brokerage firm was acquired by the bank early in 2009.

Civil charges also were being filed against Joe Price, who was chief financial officer at the time of the deal and is now head of BofA's consumer-banking division.

As Attorney General Andrew Cuomo's office was filing its civil charges, the Securities and Exchange Commission reached a settlement to resolve federal charges it brought against the bank over similar issues. The bank will pay a penalty of $150 million. It is the second time the SEC and Bank of America have tried to settle that case.

Also, the bank agreed to pay $1 million to North Carolina, its home state, to resolve an investigation there.

"We are disappointed and find it regrettable that the NY AG has chosen to file these charges, which we believe are totally without merit," Bank of America spokesman Robert Stickler said. "The evidence demonstrates that Bank of America and its executives, including Ken Lewis and Joe Price, at all times acted in good faith and consistent with their legal and fiduciary obligations."

Mary Jo White, Lewis' attorney, said Cuomo's decision to sue was "a badly misguided decision without support in the facts or the law."

Lawyers representing Price said the allegations were "flatly contrary to the evidence."

The bank has been accused of failing to properly disclose losses at Merrill Lynch and bonuses paid to investment bank employees before the purchase deal closed. Cuomo called Bank of America's actions "egregious and reprehensible" in deceiving shareholders and the federal government.

Merrill had not yet announced the extent of its losses from the subprime-mortgage crisis.

Bank of America is the nation's largest bank and the fifth-largest, based on deposits, in the Philadelphia area.

Bank of America received an additional $20 billion in government bailout funds in January 2009 to help offset losses it absorbed as part of the Merrill Lynch acquisition.

Two months ago, Bank of America repaid the $20 billion, plus the initial $25 billion it received in government bailout money.