Bank of America, ex-CEO Lewis settle NY lawsuit over Merrill

Wed Mar 26, 2014 6:25pm EDT
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By Karen Freifeld

NEW YORK (Reuters) - Kenneth Lewis, who turned Bank of America Corp into the nation's largest bank but also saddled it with enormous losses tied to mortgages, has settled a lawsuit accusing him of deceiving investors about one of his biggest acquisitions: Merrill Lynch & Co.

Lewis, the bank's chief executive from 2001 to 2009, will pay $10 million to resolve claims by New York Attorney General Eric Schneiderman that he misled shareholders and the government in order to complete the merger, which closed on January 1, 2009, according to a copy of the agreement obtained by Reuters.

New York accused Lewis of concealing Merrill's mounting losses from Bank of America shareholders prior to a December 5, 2008 vote on the merger, and manipulating the U.S. government into providing an extra $20 billion bailout by falsely claiming that he would back out of the merger without the money.

As part of the agreement, Lewis, 66, will also be barred for three years from serving as an officer or director of a public company. A spokeswoman for Lewis's attorney said the bank would cover his payment.

Bank of America will pay $15 million to resolve its portion of the lawsuit by Schneiderman, who inherited the case from his predecessor, Andrew Cuomo, now New York's governor. The bank also will adopt reforms, such as creating a special committee to review large acquisitions, according to a separate settlement agreement obtained by Reuters.

Both payments would cover the costs of Schneiderman's investigation, and neither Lewis nor Bank of America are admitting wrongdoing or paying damages.

Nonetheless, the settlement with Lewis, who has kept a low public profile since leaving Bank of America, would mark one of the rare times that an executive at a major U.S. bank has been held legally responsible in a case alleging wrongful conduct linked to the 2008 global financial crisis.

"Individuals - not just corporations - should be held accountable for their actions," Schneiderman said in a statement confirming the settlements.   Continued...

Bank of America Corp, former Chief Executive Kenneth Lewis speaks during the Wall Street Journal Deals and Dealmakers conference, in New York, in this file image from June 11, 2008. REUTERS/Chip East