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Bank of America CEO Kenneth Lewis may be in for much more than a trip to the woodshed. Ever since Bank of America completed its deal to buy Merrill Lynch, questions have lingered about whether the chief executive was completely honest with shareholders about the state of Merrill - specifically about the year-end bonuses paid out to Merrill employees despite the investment bank's huge 2008 losses. Bank of America shareholders have already voted to remove Lewis from the post of chairman in part because losses at Merrill turned out to be worse than Lewis let on. But that...
...strike a new settlement that satisfies the judge, but based on Rakoff's ruling, law professor John Coffee, who teaches a class with Rakoff at Columbia, says it is unlikely the judge would accept a substitute settlement that doesn't name any individual executives. Lewis, as the chief executive of the bank, is an obvious target. The SEC has yet to say whether it plans to pursue charges against Lewis or any other executive at Bank of America...
...Even if Lewis escapes charges in the SEC case, he will still have to dodge New York attorney general Cuomo, who is also reportedly weighing charges against chief financial officer Joe Price over the Merrill bonuses and other issues surrounding the combination of the two banks. Neither Lewis nor Price could be reached for comment, though a Bank of America spokesman recently provided this statement to the Wall Street Journal: "We will continue to cooperate with the Attorney General's office as we maintain that there is no basis for charges against either the company or individual members...
...mails reviewed by TIME.com shows that Merrill employees were giving Bank of America executives regular updates about the deteriorating profits at the investment bank. In a response to a Dec. 3 e-mail detailing nearly $1 billion in additional Merrill trading losses, Neil Cotty, B of A's chief accounting officer, responded, "BTW ... thank you for this ... they did ask ..." Importantly, none of the e-mails say the information on Merrill's losses was needed before presentations being made to Bank of America's CFO Price...
...securities violations under the Martin Act, which gives the attorney general of New York the power to prosecute financial fraud. And it is not unheard of for executives to go to jail for lying on a proxy statement. In the 1970s, in a famous Wall Street fraud case, the chief executive of National Student Marketing was sentenced to 18 months in jail for lying about the finances of a company National Student Marketing was acquiring. Yet Cuomo has typically stuck to bringing civil charges against executives and companies, and that is reportedly what he is considering in the Bank...