The New York Times reports on a lawsuit pending against Bank of America, its former CEO Kenneth D. Lewis, and other former Directors and Officers. The suit was brought by BOA Shareholders. They accuse the Defendants of intentional fraud, according to the reporting, in connection with disclosure of a huge loss Merrill Lynch was experiencing and about to report.
The Plaintiffs claim that Bank of America knew but did not disclose this information before BOA acquired Merrill Lynch's liabilities in late 2008 to early 2009.
The Plaintiffs also claim that as soon as the acquisition of Merrill Lynch was completed, the Defendants disclosed "this staggering loss ... to ensure that Bank of America shareholders did not vote against the transaction." Prof. Steven M. Davidoff, "Deal Professor / Dealbook / For Bank of America, a Looming $50 Billion Claim of Havoc" p. B7, col. 1 (New York Times Nat'l ed., Wed., September 28, 2011).
The report by Professor Davidoff summarizes the lawsuit this way:
The case shows how regulators' actions can be supplemented by private actions. And if the plaintiffs win, this case may be the exceedingly rare event of directors and officers, particularly Mr. Lewis and Mr. [Joseph] Price [BOA's former CFO], actually having to pay money personally to settle a securities fraud claim. If so, the two men would join the relatively few executives from the financial crisis who have been personally penalized.
Whatever the outcome of this case, it appears that Bank of America shareholders were sacrificed in December 2008 so that the Merrill deal could be completed. The bill may now be coming due for Bank of America.
And to that summary should be added here the news that at last, Directors and Officers Liability Insurance may not pay alone, if at all.
The 22nd Annual Bad Faith Litigation Conference of the American Conference Institute is being held in 2011 in Orlando, Florida. The author will be speaking. As a result, the ACI will offer you a large discount if you choose to register for the Conference. The last day announced by the ACI to obtain this discount, however, is Friday, September 30, 2011. In order to register and receive this discount from the ACI, contact Amanda Waltmon, Esquire, Legal Analyst and Program Director at the ACI. Ms. Waltmon's direct dial is 212.352.3220, ext. 5231 or send Ms. Waltmon an EMail at a.waltmon@americanconference.com. Here is a link to the American Conference Institute Website Page which features this Conference including registration, if you or someone you know would like to attend.
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