SUPREME COURT OF THE STATE OF NEW YORKCOUNTY OF NEW YORK---------------------------------------------------------------xTHE PEOPLE OF THE STATE OF NEW YORKBy ANDREW M. CUOMO, Attorney General of the State of New York,Plaintiff,– against –BANK OF AMERICA CORPORATION,KENNETH D. LEWIS and JOSEPH L. PRICE,Defendants.::::::::::::::Index No.
COMPLAINT
---------------------------------------------------------------xPlaintiff, the People of the State of New York, by Andrew M. Cuomo, Attorney Generalof the State of New York (the “Attorney General”), alleges upon information and belief thefollowing against defendants Bank of America Corporation, (“Bank of America,” “BoA” or“Bank”), Kenneth D. Lewis (“Lewis”), and Joseph L. Price (“Price”) (collectively,“Defendants”):
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TABLE OF CONTENTS
SUMMARY........................................................................................................................................1JURISDICTION AND VENUE.........................................................................................................8PARTIES............................................................................................................................................9RELEVANT PERSONS.....................................................................................................................9FACTUAL ALLEGATIONS...........................................................................................................13I. BEFORE THE SHAREHOLDER VOTE: BANK MANAGEMENT CONCEALSMERRILL’S MOUNTING DETERIORATION FROM ITS SHAREHOLDERS..............13A. Merrill Lynch’s Fourth Quarter Financial Reports Tracked Actual Losses.............14B. BoA Executives Confront October’s Disastrous Results..........................................16C. BoA Lawyers Initially Decide to Disclose Merrill Losses to Shareholders butThen Reverse Course................................................................................................171. Price soft-pedals the disclosure issue with Merrill..........................................202. After Price’s meeting with Thain, Bank of America reverses course ondisclosure of Merrill’s losses...........................................................................21D. Bank Management Becomes Aware of More Than $2 Billion In Further LossesAttributable to a Goodwill Impairment.....................................................................25E. Merrill’s Auditors Advise that Disclosure of the Losses was Warranted, but theWarning is Not Relayed to Counsel..........................................................................26F. December 1: Price and Curl Seek Legal Advice About the MAC...........................27G. December 1: Price Knows that Merrill’s Actual Losses to Date Are About $13.3Billion with Goodwill, and that These Losses Will Increase Further When theMarks Are Accounted For........................................................................................31H. December 3: Thain, Price, Lewis and Others Discuss Merrill’s Staggering Losses,Which Are Confirmed to Exceed $14 Billion Pretax to Date...................................31I. Price Speaks with Mayopoulos on December 3 but Does Not Tell Him that LossesHave Almost Reached His $10 Billion Disclosure Threshold..................................32J. December 3: Curl Claims, Then Denies, a Call to Counsel about Disclosure..........34
iiK. December 4: On the Eve of the Shareholder Vote, Price Learns of Pretax LossesWith Goodwill of Over $14 Billion..........................................................................37L. December 5: Bank Management Learns of Additional Losses Before theShareholder Vote......................................................................................................38M. The Bank’s Corporate Treasurer’s Plea for Disclosure of the Losses Is Dismissed39N. Known Losses to Date at Merrill Top $16 Billion by the End of the Day...............40O. December 6-10: Final November Results and the Second December BoardMeeting.....................................................................................................................42P. December 10: Lewis Summarily Fires his General Counsel....................................44II. AFTER THE SHAREHOLDER VOTE: ON LOSSES ONLY SLIGHTLY HIGHERTHAN THOSE KNOWN TO IT BEFORE THE VOTE, BANK OF AMERICAFORCES THE GOVERNMENT TO SAVE THE DISASTROUS MERGER WITHTAXPAYER ASSISTANCE................................................................................................46A. December 12-15: Bank Management Manufactures an “Acceleration” in Losses atMerrill.......................................................................................................................49B. A December 11 Report Is Issued Showing $1 Billion in December Marks.............49C. Cotty and Hayward Revise the December 11 Report to Show a Q4 $18.106Billion Pretax Loss Inflated with Hurried Estimates................................................50D. Bank Management Considers the MAC...................................................................51E. Bank Management Knew Before Approaching the Government ThatRenegotiation with Merrill Was Impossible.............................................................53F. Bank Management Meets with Federal Officials and Makes the Empty Threat toTerminate the Merger...............................................................................................54G. Bank Management Discusses Merrill Lynch’s Fourth Quarter Losses in DireTerms with Federal Officials....................................................................................56H. Bank Management Continues Its Discussions with the Federal Government,Emphasizing the MAC..............................................................................................56I. The Federal Reserve Concludes That Merrill Losses Occurred Earlier thanRepresented by Bank Management..........................................................................58J. Secretary Paulson Threatens Removal of the Bank Board and Management,Creating a Conflict of Interest for Lewis and Price, and the Government Assuresthe Bank of Billions in Taxpayer Aid.......................................................................60
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