Former Bank of America CEO Makes ‘Very Damaging’ Admission

by Angela Nazworth | June 7, 2012 9:56 am

Former Bank of America CEO Makes ‘Very Damaging’ Admission

An admission made by retired Bank of America (NYSE:BAC[1]) CEO Ken Lewis in a sworn testimony could prove “very damaging” to the former CEO and the mega bank, according to a legal expert.

In a deposition regarding a class action lawsuit filed on behalf of BofA shareholders, Lewis admitted that he was aware of larger than reported loss projections before shareholders voted on the purchase of Merrill Lynch in 2008. According to court documents obtained by The New York Times[2], Lewis said BofA “expected the merger to be more than 13 percent dilutive in 2009 and 2.8 percent dilutive in 2010.”

The suit, which asserts BofA executives misled them by not disclosing Merrill’s mortgage losses, could result in more monetary fines for the bank, but it won’t lead to criminal charges. The Securities and Exchange commission previously settled its investigation of the high-profile merger and fined the bank $150 million.

A legal expert who spoke with The Charlotte Business Journal[3] said that Lewis’ statement could be harmful to the Charlotte-based bank, especially considering BofA previously denied any wrongdoing in the matter.

“A statement like that from Lewis is very damaging to the case,” Tom Hazen, a securities law professor at UNC Chapel Hill, told the Charlotte Business Journal. “If he knew, then other people inside the company surely knew.”

Endnotes:
  1. BAC: http://studio-5.financialcontent.com/investplace/quote?Symbol=BAC
  2. The New York Times: http://www.nytimes.com/2012/06/04/business/bank-of-america-withheld-loss-figures-ahead-of-merrill-vote.html?_r=3&hp
  3. The Charlotte Business Journal: http://www.bizjournals.com/charlotte/blog/bank_notes/2012/06/bank-of-america-ex-ceo-ken-lewis.html

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