Kenneth D. Lewis, who announced his retirement this week as chief executive of Bank of America Corp., may be hit with civil fraud charges in New York, according to a new report.
The New York Times reported that Andrew M. Cuomo, the state's attorney general, may file suit against Lewis as early as next week for having failed to fully disclose the details of the bank's purchase late last year of Merrill Lynch & Co.
Lewis resigned in the face of growing concern over his management of the issue, which is now the subject of investigations by multiple agencies at the state and federal levels.
Cuomo and others are examining why Bank of America did not tell its shareholders that it had approved billions of dollars in bonus payments to Merrill executives.
What at first appeared to be a minor regulatory matter has spun nearly out of Bank of America's control. A federal judge in New York earlier this month rejected a $33 million settlement with the Securities and Exchange Commission over the matter, and a congressional panel recently warned the company that it could not rely on attorney-client privilege when giving testimony on Capitol Hill.
In court proceedings related to the SEC settlement, the bank claimed that its lawyers were to blame for the faulty proxy statement distributed to shareholders before their vote on the Merrill deal. But it also claimed the privilege in defending itself from having to detail the interactions between the lawyers and senior bank executives.
Experts told the Times that Lewis would not necessarily be able to rely on the privilege even in state court. The privilege belongs to the bank, not the executive, and so if the latter eventually decides to concede the issue, Lewis may face the uncomfortable possibility of having the legal advice he received detailed in open court. Whether or not he followed that advice precisely may be critical in establishing his culpability.
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