NEW YORK - The New York attorney general's office said Thursday it filed civil charges against Bank of America and former CEO Ken Lewis, saying the bank misled investors about Merrill Lynch before it acquired the Wall Street bank in early 2009.
Civil charges were also being filed against Joe Price, the chief financial officer at the time of the deal who now heads BofA's consumer banking division.
At the same time Attorney General Andrew Cuomo's office was filing its civil charges, the Securities and Exchange Commission reached a settlement to resolve federal charges it brought against the bank over similar issues. It is the second time the SEC and Bank of America tried to settle that case.
Bank of America has been accused of failing to properly disclose losses at Merrill and bonuses paid to investment bank employees before the deal closed. Cuomo called those actions "egregious and reprehensible" in deceiving shareholders and the federal government.
The bank, Lewis and Price face charges under New York's Martin Act, aimed at fighting fraud. The charges lay the blame for additional government bailouts and alleged deception on the top executives at the nation's largest bank.
Cuomo's use of the Martin Act could be hard to deal with for Lewis and Price. Unlike federal securities law, the Martin Act doesn't require proving any intent to defraud shareholders, said John C. Coffee, a Columbia Law School professor specializing in corporate governance and securities law.
"You merely have to show that these individuals were responsible for materially false disclosures made to investors," Coffee said.
Lewis stepped down as CEO from Bank of America Corp. Dec. 31 after almost a year of strife that followed the bank's purchase of Merrill Lynch. Price became head of the bank's consumer banking division, taking over for Brian Moynihan, who succeeded Lewis as CEO Jan. 1.
Moynihan is not under investigation.
Bank of America spokesman Robert Stickler said: "We are disappointed and find it regrettable that the NY AG has chosen to file these charges, which we believe are totally without merit."
Mary Jo White, Lewis' attorney, said in a statement that Cuomo's decision to sue was "a badly misguided decision without support in the facts or the law." Lawyers for Price said the attorney general's allegations were "flatly contrary to the evidence."