Federal regulators sued Bank of America Corp. on Tuesday, accusing the company of failing to disclose “staggering financial losses” at Merrill Lynch before shareholders approved a combination of the companies.
The lawsuit filed by the Securities and Exchange Commission in U.S. District Court in Manhattan sought an order requiring Bank of America to pay a civil penalty for not telling shareholders it was losing $15.3 billion in the fourth quarter of 2008.
Bank of America spokesman Robert Stickler called the charges “totally without merit.”
He said the company believes it provided sufficient and appropriate disclosure to shareholders prior to their vote approving the combination.
“We look forward to presenting the facts in court,” Stickler said. “What we would note is that there were no charges against individuals and no charges of fraud. We were pleased with that.”
The SEC said the information about the losses should have been announced when it was learned after the companies publicly announced their deal in September 2008. They did not obtain shareholder approval until three months later.
Federal laws governing such transactions require that losses be revealed if they were not already reflected in Merrill’s quarterly reports or other filings.
The SEC and Bank of America, which is based in Charlotte, N.C., are already scheduled to go to trial March 1 after the SEC previously accused the bank of failing to disclose billions of dollars in bonuses paid at Merrill Lynch after the acquisition was completed a year ago.
In the new lawsuit, the SEC said Bank of America “learned of staggering losses at Merrill” in October and November of 2008.
The agency said the bank consulted its lawyers who “erroneously and negligently concluded that no disclosure was necessary because the projected quarterly loss was within the range of losses that Merrill had sustained in the preceding five quarters.”
Those losses included a $4.5 billion loss by Merrill in October 2008. The deal was approved by shareholders at a Dec. 5, 2008 meeting. Several days later, Bank of America received an updated report reflecting a forecasted net loss of more than $12 billion at Merrill, the SEC said.
It said the full fourth quarter 2008 results at Merrill were announced on Jan. 16, 2009, nearly six weeks after the shareholder vote and two weeks after the deal had closed.
A day after net loss of $15.3 billion for the quarter was reported, Bank of America stock dropped by nearly 30 percent, the SEC noted.
Bank of America shares fell 72 cents, or 4.3 percent, to $16.21 in afternoon trading.
Greta Thunberg slams climate change inaction as Davos awaits Trump
Swedish teen activist Greta Thunberg on Tuesday slammed global inaction on climate change in front of the world's top business leaders, as the annual Davos forum faced up to the perils of global warming while bracing for an address from US President Donald Trump.
The 50th meeting of the World Economic Forum in the Swiss Alps resort got under way seeking to meet head-on the dangers to both the environment and economy from the heating of the planet.
Trump, who has repeatedly expressed scepticism about climate change, is set to give the first keynote address of Davos 2020 on Tuesday morning, on the same day as his impeachment trial opens at the Senate in Washington.
Trump arrives in Davos hours before impeachment trial reopens
US President Donald Trump arrived in Davos on Tuesday for the annual WEF forum, where he was to give a keynote speech just hours before his impeachment trial kicks into high gear in Washington.
Trump's Marine One helicopter touched down in the picturesque Swiss ski resort shortly ahead of his scheduled speech to the World Economic Forum, which this year is focusing on climate change.
He was also due to meet separately with the president of Iraq, Pakistan's prime minister and the head of the European Union executive body.
Meanwhile in Washington, Trump's impeachment enters a new phase in the Senate with legislators debating the format for the trial.
These corporations are spending the most to undo our democracy — thanks to Citizens United
It has now been exactly 10 years since the U.S. Supreme Court opened the floodgates for special-interest political advertising in its Citizens United ruling. To mark the occasion, the Center for Responsive Politics has published an excellent report detailing how political spending has changed over the last decade.
One significant finding is that, although Citizens United overturned the prohibition on independent political expenditures by corporations, most companies have not taken advantage of that new right directly. The biggest surges in spending have come from wealthy individuals and from Super PACs.