BofA Risks Defying Gov't Demands on Merger
The House Committee on Oversight and Government Reform wants to know when BofA knew about Merrill's catastrophic losses that made it available for a merger, when the government committed a second dosage of public bailout money to the bank and what legal advice the bank received about disclosing information to shareholders, according to a report in Monday's New York Times.
BofA agreed to take over Merrill in September 2008 as investment bank Lehman Brothers was preparing to file for bankruptcy during the height of the financial crisis. It was later disclosed that Merrill paid executives $3.6 billion in last-minute bonuses before Bank of America took over in January with the knowledge of BofA executives.
The committee isn't the only governmental body looking into the merger. Last week, five members of Bank of America's board of directors were reportedly served with subpoenas as part of an investigation out of the New York Attorney General's office. BofA is also preparing to defend itself in court against the Securities and Exchange Commission in February 2010.
Until now, BofA has claimed attorney-client privilege to deny information to investigators. However, oversight committee Chairman Edolphus Towns, D-N.Y., has told the bank that the privilege doesn't apply to Congress.
The Times reported that Towns wrote in a letter Friday to Bank of America that the bank seemed to be "hiding information." The bank responded Saturday that it wanted to wait to answer Towns's demands until after Tuesday, when Anne Finucane, the bank's chief strategy and marketing officer is scheduled to meet with Towns, the Times reported. A spokesman for the chairman told the newspaper that Towns wasn't going to move the deadline.
"We appreciate and take very seriously the committee's important oversight role and have nothing but the strongest intent to work with the committee to help it understand these events," BofA CEO Kenneth Lewis said in a letter to Towns.