US banking pair to face fraud court over deal

Ken Lewis, the retired boss of Bank of America, and the company's former finance chief, Joe Price, have been charged with fraud over their handling of the acquisition of Merrill Lynch during the financial panic of 2008.

The New York Attorney-General, Andrew Cuomo, launched a civil lawsuit against the two men and Bank of America, saying the defendants misled shareholders and the federal government over the acquisition.

The lawsuit came on the day Bank of America agreed to compensate its shareholders US$150 million ($217.70 million) to settle claims that it failed to reveal the deteriorating state of Merrill Lynch's finances, and the bonuses the investment bank planned to pay, before shareholders voted for the deal in December 2008.

Cuomo, who is running for Governor of New York, laced his lawsuit with the language of public outrage at the bailout of Wall St.

"This merger has, in many ways, become a classic example of how the modus operandi of our nation's largest financial institutions led to the near-collapse of our financial system," he said.

"Bank of America, through its top management, was motivated by self- interest, greed, hubris and a palpable sense that the normal rules of fair play did not apply to them. Bank of America's management thought of itself as too big to play by the rules and, just as disturbingly, too big to tell the truth."

The acquisition of Merrill Lynch, on the same weekend that Lehman Brothers failed, secured Lewis' long-held ambition to turn Bank of America into a major force in investment banking.

But he was forced to retire early amid shareholder anger that losses at Merrill Lynch forced the bank to turn to the federal government for US$45 billion in bailout money.

Lewis responded that he had acted in good faith and in accordance with advice from the bank's lawyers, and Cuomo's lawsuit was "a badly misguided decision without support in the facts or the law". Price said the allegations were utterly false and Bank of America said it would vigorously defend itself.

- INDEPENDENT