Congressman: BofA May Not Rely on Attorney-Client Privilege

Rep. Adolphus Towns of New York told Bank of America executives that they have until today to reveal how the bank received a second round of bailout funding to finance the purchase. They must also tell Town's oversight committee what legal advice the bank's management received regarding the deal, the New York Times reported.

Bank of America's purchase of Merrill Lynch was controversial from the outset, as critics wondered whether the federal government had become too involved in the private sector by helping prop up a failing company.

Outrage, however, developed when it was revealed that Bank of America had promised to pay as much as $5.8 billion in bonuses to Merrill employees but did not disclose the arrangement to shareholders asked to approve the deal. That error has led to multiple investigations by federal and New York State authorities.

Just last week, a federal judge in New York rejected a proposed $33 million settlement with the Securities and Exchange Commission, saying that the arrangement failed to hold executives accountable for misleading investors. In motions prior to the decision, Bank of America blamed its attorneys for the mistake.

Also last week, Andrew Cuomo, the attorney general of New York, subpoenaed five Bank of America executives over the matter.

While Mr. Cuomo and the SEC have focused on the Merrill bonuses, Mr. Towns is looking into a different aspect of the purchase, namely the massive losses at Merrill that would have scuttled the deal had the Treasury Department not been willing to provide additional financial support.