New York Attorney General Andrew Cuomo has subpoenaed five Bank of America board members Wednesday as part of the investigation of the bank’s acquisition of financial firm Merrill Lynch, a source close to the investigation said, according to Bloomberg.com.
Investigators believe the board directors, who were on the board at the time when the deal was discussed, may have key information about whether the company deceived investors about Merrill’s situation before voting to approve the merger in December, which was completed in January.
The source close to the case said board members would be asked to go under oath and testify. Cuomo plans to go after most of the other board members who presided during the deal’s discussions, and those who refuse will face charges, Cuomo wrote in a Sept. 8 letter, Bloomberg said.
Investigators plan to ask whether the Bank of America bank held back information about the $15 billion in additional losses from the shareholders. The Securities Exchange Commission is also probing into whether they withheld information about the $3.6 billion worth of bonuses paid to Merrill’s executives.
The subpoenas follow New York U.S. District Judge Jef Rakoff’s refusal of the $33 million settlement between Bank of America and the Securities and Exchange Commission.
The judge refused because he thought it was not fair and quoted Oscar Wilde’s “Lady Windermere’s Fan” in his ruling, saying a cynic is a person “who knows the price of everything and the value of nothing,” the New York Times reported.
The settlement would have cleared the bank of the charges.
The financial intermediary will “cooperate with the attorney general’s office as we maintain that there is no basis for charges against either the company or individual members of the management team,” according to a statement by the bank, Bloomberg.com reported.
“Putting pressure on Bank of America was Mr. Cuomo’s game plan from day one,” Duke law professor James Cox said, according to Bloomberg.com “It’s a come-to-Jesus moment for Bank of America’s executives.”
The House Oversight and Government Reform Committee plans to question Federal Deposit Insurance Corp. Chairman Sheila Bair and SEC chairman Mary Schapiro. The committee also will also question Schapiro’s predecessor, Christopher Cox.
The Cuomo's office is in the final steps of drafting charges against senior executives at the bank, a source familiar with investigation said earlier this week, according to the Washington Post.