New York, NY - April 25, 2014 - Attorney General Eric T. Schneiderman today announced a $7.5 million settlement with Bank of America Corporation’s former Chief Financial Officer, Joe L. Price, regarding the bank’s actions as it sought in 2008 to merge with Merrill Lynch & Co. Despite its top executives’ specific knowledge of mounting losses at Merrill Lynch that were forecast at more than $9 billion, Bank of America failed to disclose that information to shareholders prior to their vote on the proposed merger. The Attorney General also alleged that the bank’s former CEO, Kenneth D. Lewis, and Price misrepresented to shareholders the impact that the merger with Merrill would have on Bank of America’s future earnings.
“This settlement is one more step in our effort to hold top financial executives accountable for their actions,” said Attorney General Schneiderman. “As with our settlement last month with CEO Ken Lewis, today’s action sends a message that conduct harming investors, shareholders, and the public will not go unpunished. I’m pleased to close the final chapter in our litigation over Bank of America’s merger with Merrill, and I will continue to hold individuals – as well as corporations – accountable for their actions.”
The Attorney General’s latest settlement again holds a top executive of a major financial institution accountable for his fraudulent conduct: Joe L. Price is barred from serving as an officer or director of a public company for 18 months, and he will pay $7.5 million to the State of New York.
After a lengthy investigation of the conduct of Bank of America and its top executives concerning the bank’s efforts to consummate a merger in late 2008 with Merrill Lynch, the bank and two of its top executives were sued by then-Attorney General Andrew Cuomo under the Martin Act and the Executive Law. The lawsuit alleged that they fraudulently withheld from investors material financial information that forecast rapidly escalating, multibillion-dollar losses at Merrill for its 2008 fourth quarter, while at the same time asking shareholders to approve a merger with Merrill. Despite concealing these forecast losses from investors as immaterial, the bank then immediately sought massive financial assistance from the federal government, claiming that there had been a “material adverse change” in Merrill’s financial condition over the previous three months. Bank of America continued to conceal Merrill’s forecast losses until mid-January 2009, when disclosure of Merrill’s multibillion-dollar fourth-quarter losses led to a $50 billion sell-off in shares of Bank of America.
The investigation by the Office of the Attorney General and the prosecution of the bank and its top executives directly contributed to the settlement last year of securities class-action litigation arising out of the same facts, with investors recovering $2.425 billion in damages. Plaintiffs’ counsel specifically acknowledged the OAG’s crucial contributions to bringing about this tremendous result for investors.
Litigation and settlement of this case has been handled by Karla G. Sanchez, Executive Deputy Attorney General for Economic Justice, and Philip G. Barber, Senior Enforcement Counsel.