Bank of America fired its top lawyer in December 2008 before its fateful takeover of Merrill Lynch simply to make way for another executive, and not because he had given the company legal advice it didn't want to hear, the Securities and Exchange Commission has said in a court filing.
The SEC's version of the reasons behind the abrupt termination of then-general counsel Timothy Mayopoulos is at odds with allegations by New York Attorney General Andrew Cuomo.
Cuomo brought fraud charges earlier this month against
Bank of America Corp., its former CEO Ken Lewis and another executive, accusing the bank of misleading shareholders about stunning losses at Merrill before it acquired the Wall Street bank in early 2009.
The SEC has reached a $150 million settlement with
Bank of America to resolve charges over disclosure of the Merrill losses and the bank's authorization for Merrill to pay up to $5.8 billion in bonuses to its employees — a deal awaiting approval by a federal judge in Manhattan. The judge, Jed S. Rakoff, last year rejected a $33 million settlement between the bank and the SEC.
Rakoff said in an order issued Wednesday that he was postponing until next Monday his decision on whether to approve the settlement, originally expected by the end of this week.
Mayopoulos has said he advised
Bank of America executives that the bank couldn't make a case that Merrill's losses, estimated at more than $15 billion for the fourth quarter of 2008, provided legal grounds for it to back out of the merger deal.
The SEC said in its filing that according to Lewis, Mayopoulos's firing on Dec. 10, 2008, five days after
Bank of America shareholders approved the merger, occurred "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," the SEC said. That was done by offering Moynihan Mayopoulos's job and upgrading it to one that reported directly to Lewis, it said.
The SEC said Lewis' account of events "is corroborated" by the testimony of several other executives and directors of the bank as well as e-mails and other documents.
"His account is not contradicted by any evidence," the agency said.
Moynihan replaced Lewis as CEO on Jan. 1.
But Cuomo's office alleges that Mayopoulos was "intentionally misled" about the size of Merrill's losses and that when he learned of them after the shareholder vote, he tried to confront
Bank of America's then-chief financial officer but was "summarily terminated."
At a House hearing in November, some lawmakers said it wasn't credible that Moynihan, who hadn't practiced law in years, would replace the experienced Mayopoulos unless company management wanted to disregard his advice.
Cuomo's office told the SEC in a letter Tuesday that the federal agency didn't consider transcripts of testimony of five bank executives, taken by Cuomo's staff, in its investigation and settlement proposal. The attorney general's office is declining to provide the material, recently requested by the SEC, saying that could negatively affect its own ongoing investigation.
Rakoff requested in his order that Cuomo's office voluntarily provide the material to the court by Friday.
"We are happy to provide the court with whatever information may be helpful," a Cuomo spokesman, John Milgrim, said Wednesday.
The $20 billion takeover deal was forged at the height of the financial crisis, on the same September 2008 weekend that Lehman Brothers collapsed. It was first questioned after
Bank of America disclosed that Merrill would post 2008 losses of $27.6 billion — far more than expected.
Bank of America, which had already received $25 billion in U.S. bailout aid, then asked for and received an additional $20 billion from the government to help offset those losses.
Bank of America, which is based in Charlotte, N.C., has maintained there is no legal basis for fraud charges against the bank, Lewis or former chief financial officer Joe Price, and that Mayopoulos's firing had no connection with any legal advice he gave.
"We believe the SEC's version of events is correct," spokesman Robert Stickler said Wednesday.
