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New York state officials Thursday sued Bank of America and its former top executives alleging fraud and deception to obtain billions in taxpayer bailout funds to acquire brokerage Merrill Lynch.
Andrew Cuomo, the New York state attorney general, announced the lawsuit against the bank, former chief executive Kenneth Lewis and former chief financial officer Joseph Price "for duping shareholders and the federal government in order to complete a merger with Merrill Lynch."
"This merger is a classic example of how the actions of our nation's largest financial institutions led to the near-collapse of our financial system," Cuomo said in a statement.
"Bank of America, through its top management, engaged in a concerted effort to deceive shareholders and American taxpayers at large. This was an arrogant scheme hatched by the bank's top executives who believed they could play by their own set of rules. In the end, they committed an enormous fraud and American taxpayers ended up paying billions for Bank of America's misdeeds."
The news came just after the Securities and Exchange Commission (SEC) announced that Bank of America had agreed to pay 150 million dollars to settle complaints over its handling of the Merrill merger.
Bank of America said it was "disappointed" by the charges, saying they were "totally without merit."
"In fact, the SEC had access to the same evidence as (Cuomo) and concluded that there was no basis to enter either a charge of fraud or to charge individuals," the bank said in a statement.
"The company and these executives will vigorously defend ourselves," it added.
Neil Barofsky, the inspector general of the Treasury's Troubled Asset Relief Program (TARP) that bailed out Bank of America and backed the Merrill takeover, joined in the announcement by Cuomo.
Barofsky, charged with overseeing that the TARP funds were properly used, participated in the probe, the statement said.
According to the lawsuit, "Bank of America's management intentionally failed to disclose massive losses at Merrill so that shareholders would vote to approve the merger.
"Once the deal was approved, Bank of America's management manipulated the federal government into saving the deal with billions in taxpayer funds by falsely claiming that they would back out of the deal without bailout funds."
