Cuomo Sues Bank Of America, Accuses It Of Fraud

Now that Bank of America has agreed to a $150 million settlement with the Securities and Exchange Commission, NY Attorney General Andrew Cuomo has filed a lawsuit against the bank and its former CEO and CFO, accusing it of misleading the government and investors in its purchase of Merrill Lynch. Today Cuomo said:

This merger is a classic example of how the actions of our nation’s largest financial institutions led to the near-collapse of our financial system. Bank of America, through its top management, engaged in a concerted effort to deceive shareholders and American taxpayers at large. This was an arrogant scheme hatched by the bank’s top executives who believed they could play by their own set of rules. In the end, they committed an enormous fraud and American taxpayers ended up paying billions for Bank of America’s misdeeds."

Taking a cue from predecessor Eliot Spitzer, Cuomo has been aggressive in pursuing Wall Street firms and has questioned BoA's actions regarding Merrill—namely Merrill's huge $13.8 billion 4th quarter loss in 2008 and extravagant bonuses. The AG's office now claims BoA "intentionally failed" to mention those losses so the merger would be approved; Cuomo said during a conference call, "[BofA officials] understated the losses to shareholders, then they turned around and overstated their ability to terminate the arrangement to the federal government to secure $20 billion of federal money, and that is just a fraud."

The WSJ's Deals blog suggests that Cuomo has his work cut out for him, since he's probably angling for a new job this year. Plus: "The AG’s office, which is smaller than the Securities & Exchange Commission or the US Attorney’s office, doesn’t have the man power to litigate the cases it files and is aiming instead for a high profile settlement."

Previously, Bank of America and the SEC had agreed on a $33 million settlement—which was rejected by federal judge Jed Rakoff. It's unclear if he'll approve this settlement.