Bank of America giving up Merrill deal documents
CHARLOTTE, N.C. — Bank of America Corp., giving up a months-long fight with regulators, plans to turn over documents revealing legal advice it received on its purchase of Merrill Lynch.
In a turnabout, the bank will waive attorney-client privilege that kept it from telling regulators about recommendations it received from outside attorneys over whether to disclose details to shareholders about Merrill’s mounting troubles.
On Tuesday, Bank of America spokesman Larry DiRita said, “Given the pressure in multiple inquiries to provide additional insight, we’ve decided to waive it in this matter to get the issue behind us.”
“We’ve got nothing to hide and are certain we did everything proper in the context of the Merrill acquisition,” he added.
Charlotte, N.C.-based Bank of America has agreed to waive its attorney-client privilege for investigations by the New York attorney general’s office, the Securities and Exchange Commission and a congressional committee, a person familiar with the bank’s agreement said. The person spoke on condition of anonymity because the information wasn’t publicly disclosed.
The bank’s change of heart, which came almost two weeks after the company announced that CEO Ken Lewis planned to retire by Dec. 31, appeared to be the company’s attempt to end the controversy that followed the Merrill deal.
“The last thing you want is customers to think they are less than honest,” said Michael W. Robinson, senior vice president of Levick Strategic Communications, a Washington, D.C.-based company that provides crisis management help for corporations. “What is in those documents is important, but not releasing them was far more damaging to the bank.”
“They couldn’t do it until Lewis said he was going to step down, and they wanted to do it ahead of earnings, and clearly the board wanted to get involved,” Robinson said, referring to Bank of America’s third-quarter earnings report, to be issued Friday. In September, New York Attorney General Andrew Cuomo subpoenaed five members of Bank of America’s board as part of its investigation into the Merrill acquisition.
“If you are a board member, you really never want to have a subpoena,” Robinson said. “They want to move on.”
It is believed that the legal battles that followed the Merrill deal contributed to Lewis’ decision to leave.
Cuomo’s office is trying to determine whether Bank of America misled shareholders about $3.6 billion in bonuses paid to Merrill employees and the investment bank’s mortgage lending losses, as well as whether the company failed to tell shareholders that it considered backing out of the deal before it closed on Jan. 1.
The attorney general’s office and a federal judge overseeing the SEC case have questioned whether the bank knowingly hid details about the acquisition from shareholders ahead of a vote to approve the deal. Until now, the bank had declined to provide details on legal advice it received on its disclosures to shareholders.
But in a letter to Cuomo obtained by The Associated Press, Bank of America said that following a “very constructive” meeting Oct. 6 between the bank and the attorney general’s office, it “reconsidered its position” with regard to waiving privilege, “in the hope of furthering a resolution.”
In its letter to the attorney general’s office, Bank of America said it will waive privilege with respect to communications about what bonus-related disclosures would be made in, or omitted from, the joint proxy statement issued by Bank of America and Merrill on Nov. 3, 2008, in connection with their merger. It will also waive privilege regarding Bank of America’s consideration about whether to back out of the deal under a material adverse change clause, and the disclosure or nondisclosure of Merrill’s 2008 fourth-quarter financial performance and potential goodwill impairment charges before the acquisition’s Jan. 1 closing.
Bank of America also said in the letter it will waive privilege related to its communications with the Federal Reserve, the Treasury Department and other government officials regarding federal aid in connection with the Merrill Lynch takeover.
Lewis has said he was pressured by the Treasury and Fed to complete the purchase. Bank of America agreed to acquire Merrill Lynch in a hastily arranged deal in September 2008, at the height of the financial crisis, just as Lehman Brothers was preparing to file for bankruptcy.
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Bernard reported from New York.
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