Bank of America’s purchase of Merrill Lynch back in January of 2009 for $29 billion has brought the bank a lot of uninvited legal attention. After suffering a loss of $27.6 billion in 2008, Bank of America paid out $3.6 billion in bonuses to Merrill employees before closing the deal. The Securities and Exchange Commission (SEC), New York Attorney General Andrew Cuomo and other congressional investigators are probing whether or not Bank of America failed to disclose to shareholders Merrill Lynch’s losses and bonus payments before the merger was approved. And, the Department of Justice and the FBI have been conducting a criminal investigation about the Bank of America-Merrill Lynch deal for six months.

The SEC settled the civil fraud charges for $33 million in August of 2009. However, just last week, federal Judge Jed S. Rakoff of the Southern District of New York rejected the settlement noting that “it suited the immediate interests of the SEC and Bank of America, but neither the public interest nor that of Bank of America’s shareholders.” Rakoff notes that the SEC is only appearing to be tough on the bank, but in actuality is not as the SEC failed to probe Back of America executives and its attorneys. He ordered the case to trail in February of 2010.

Given that it is very rare for a federal judge to reject a major enforcement, the SEC defended the settlement noting, “We firmly believe that the settlement we submitted to the court was reasonable, appropriate and in the public interest.” The SEC noted that it couldn’t further learn what was discussed by Bank of America executives and attorneys as the bank declined to waive its attorney-client privilege; however, it believes that Bank of America did break securities laws by not forthrightly disclosing complete and accurate information about the bonuses paid to Merrill Lynch employees.

Now, a House panel, the Committee on Oversight and Government Reform, is further questioning the bank and has ordered that it cannot use the attorney-client privilege when operating with congress. Chairman of the committee, Representative Edolphus Towns, gave the bank until noon on Monday, September 21 to provide answers and legal documents. In a strongly worded letter, Towns inquired “when [Bank of America] became aware of the enormous losses at Merrill last year, when it received a commitment from the federal government for a second round of bailout money and what legal advice its management received about whether it had to disclose those developments to the bank’s shareholders.”

Bank of America missed the Monday deadline to turn in the merger documents.

What, if anything, is Bank of America trying to hide? Could it be that one of the nations’ largest and most powerful banks received the tax dollars of Americans as a bailout in one hand while distributing bonuses to the executives of the failed entity Merrill Lynch? The investigation continues — hopefully all will come to light and justice will prevail.

Posted by Adrienne on September 22, 2009 at 1:14 pm.