Bank of America Corp. fired back at New York Attorney General Andrew Cuomo on Tuesday with a letter calling his office's allegations of wrongdoing "spurious" and claiming the bank is not hiding behind its lawyers by refusing to provide testimony on privileged discussions surrounding the purchase of Merrill Lynch.
The Sept. 8 letter from Bank of America's outside attorney Lewis Liman is a response to a letter from David Markowitz, chief of Cuomo's investor-protection bureau, that accused the bank of "indiscriminate invocation of the attorney-client privilege" and "hindering" efforts to determine which company officers potentially should be charged with securities-law violations. Markowitz also outlined four "failures" to tell shareholders material information related to the bank's takeover of Merrill.
"The basic premise of the letter is simply wrong," Liman wrote.
The bank, Liman said, has not "offered reliance on legal advice as a justification for its disclosures" and "no one has sought to take unfair advantage of the assertion of the privilege by hiding information from your office or anyone else." He also notes that Cuomo's office rejected requests to talk about the "relevant facts" of the case.
Cuomo's office on Tuesday highlighted several areas of alleged wrongdoing by B of A and "its senior officers," including a merger proxy document that did not mention $3.6 billion in Merrill bonuses, nondisclosure of Merrill's forecast losses, no mention of a $2 billion goodwill charge and a discussion before a Dec. 5 shareholder vote about whether Merrill's losses amounted to a "material adverse effect." The finding of a material adverse effect could be a trigger for the bank to back out of the deal.
Liman refuted each of these points in his letter, noting that the merger proxy document "did not contain any false or misleading statements," that the goodwill charge was reconciled via purchase accounting at the completion of the merger and that there was no law requiring the bank to disclose Merrill's mounting losses or discussions about terminating the merger. "Bank of America and Merrill Lynch properly reported Merrill Lynch's results when they were required to do so - after the close of the quarter."
On the subject of early December conversations between bank executives and then-general counsel Timothy Mayopolous about a material adverse effect, Liman said "the testimony is uncontroverted that Bank of America did not consider invoking the material adverse effect until the middle of December, after the shareholders voted to approve the merger and after Bank of America had received updated forecasts including the actual results for November 2008."