NEW YORK—The U.S. Securities and Exchange Commission (SEC) is locked in a disagreement with New York Attorney General Andrew M. Cuomo in reaching a resolution with Bank of America Corp.’s 2008 acquisition of Merrill Lynch & Co.
Both the SEC and Cuomo filed court complaints against Bank of America in its acquisition of Merrill in September 2008, specifically over Bank of America allegedly knowing the severe financial losses suffered by Merrill and declining to disclose such information to its shareholders.
Last week, the SEC and Bank of America reached a $150 million settlement, which would resolve two suits in which the SEC charged that Bank of America defrauded its shareholders by failing to disclose losses at Merrill prior to the sale.
But Manhattan U.S. District Judge Jed Rakoff asked the bank to furnish more information before he can approve the settlement—the issue being that the SEC’s version of the events surrounding the merger was vastly different than Cuomo’s.
The information sought specifically relates to the 2008 firing of the bank’s former general counsel, Timothy Mayopoulos and decisions over whether to disclose certain merger information arrived at my Mayopoulos and the bank’s outside lawyers.
But so far, Cuomo’s office has refused to relinquish to the SEC its interview with Mayopoulos.
In a court order from Judge Rakoff, the SEC said that, “I don’t think we have any doubt that we’ve accessed the same proof, the same witnesses, the same documents as the New York attorney general.”
According to the order, Cuomo’s office wrote a letter to Judge Rakoff saying that the transcripts of its interview “were not previously considered by [the SEC] in constructing its investigation, litigation, or proposed settlement.” Cuomo also said that handing over such information may impact its own investigation.
The judge requested Cuomo’s office to hand over the information by Friday, and has postponed a ruling on SEC and Bank of America’s settlement agreement.
SEC and Cuomo Disagree
Central to the saga is Cuomo’s allegation that Bank of America fired its general counsel over his stance to disclose information surrounding the merger, while SEC maintained that his departure was harmless, as he was let go to make room for Brian Moynihan, who at the time planned to leave the bank. Moynihan is now the CEO of the company.
According to the supplemental statement of facts filed by the SEC, “Mayopoulos was terminated for reasons having no connection to his legal advice or any other aspect of his job performance. Rather, Mayopoulos was terminated in an attempt by Lewis to avert the imminent departure of the Bank’s then-head of global corporate and investment banking, Brian Moynihan, by offering Moynihan the position occupied by Mayopoulos and upgrading the position to one that directly reported to the chief executive officer.”
On the other hand, Cuomo’s office insisted that Bank of America terminated Mayopoulos over the merger. “Mayopoulos knew too much,” Cuomo stated in his complaint to the court.
The bank agrees with the SEC’s version of events.
The disparity between Cuomo and the SEC underscores recent tensions between the New York regulator and the Washington regulator. In recent years, the attorney general’s office has aggressively pursued settlements from New York financial firms for alleged wrongdoing, “which occasionally has left the SEC looking flat-footed,” says one column in the Wall Street Journal.
The $150 million settlement is the second one proposed by the SEC and Bank of America. Judge Rakoff previously rejected a $33 million settlement reached by the two parties.
