Former Bank of America Chief Executive Kenneth Lewis has been levied a $10 million fine to resolve claims he misled the Charlotte, N.C., company's shareholders to secure their approval to buy Merrill Lynch.
Lewis, who has kept a low profile since his abrupt retirement at the end of 2009, also agreed to a three-year ban from serving as an officer or director of a public company as part of a settlement with New York Attorney General Eric Schneiderman.
Bank of America (BAC) agreed to pay $15 million to settle its role. Schneiderman accused B of A, Lewis and former Chief Financial Officer Joe Price of hiding information about Merrill Lynch's rising losses from investors before they voted on the $50 billion acquisition in December 2008. It will also cover Lewis's fine, according to an anonymous source close to the deal. The Attorney General's office also alleged in a press release Wednesday that Lewis and Price "misrepresented to shareholders the impact that the merger with Merrill would have on Bank of America's future earnings."
Bank of America also agreed to several corporate governance reforms. It will create a board-level corporate development committee to oversee the company's acquisition activities for at least five years. Its audit and disclosure committees will increase board oversight and the company will retain an independent disclosure counsel to make sure its disclosures in public filings are satisfactory.
Lewis and Bank of America did not admit wrongdoing as part of the settlement. Lewis has said that Bank of America "relied on experienced legal counsel both inside the bank and at a prestigious law firm with regard to what needed to be disclosed to shareholders," according to a Wednesday email from Bruce Yannett, who is representing Lewis at the law firm Debevoise & Plimpton. Meanwhile, Schneiderman plans to file a summary judgment motion against Price, the remaining defendant, on April 4.
Bank of America's ill-fated acquisition of Merrill Lynch burdened the company with billions of dollars in losses and contributed to a $20 billion government bailout. The company settled a class-action lawsuit brought by investors who lost money as a result of the deal in 2012, agreeing to pay $2.4 billion.
Bank of America has had a big day in settlements. The company also agreed Wednesday to pay $9.3 billion to Fannie Mae and Freddie Mac in order to settle claims over mortgage-backed securities sold to the government-sponsored entities.