Updated 06/04/2012 04:58 PM
Bank of America shareholder lawsuit shows withheld information
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CHARLOTTE -- Court documents filed Sunday show Bank of America withheld from investors information about losses the company would incur from purchasing Merrill Lynch.
In sworn testimony, former Bank of America CEO Ken Lewis admits bank executives knew Merrill Lynch's massive losses would be worse for Bank of America's bottom line than the company led investors to believe.
That information never made it to shareholders before they voted to approve a 2008 merger between the two institutions.
The documents are part of a federal lawsuit brought by investors who allege bank executives intentionally lied about the true impact of the Merrill Lynch deal – pointing, instead, to rosy profit predictions that indicated the merger would be a money-maker in a few years.
When asked in a deposition whether the numbers provided to investors in a proxy statement were accurate when shareholders voted on the merger Lewis said, "They were not those numbers, no."
But he said he relied on his legal team when determining what to disclose to investors.
"It was my opinion that was the much better way to go and I consciously made a decision that I should not be involved in the process because I did not have a legal background," he said in the deposition.
After investors approved the deal Bank of America's stock tumbled. The company took a second taxpayer-funded bailout to the tune of $20 billion.
Bank of America stockholders lost billions of dollars during the worst of the financial crisis.
The new details likely will be more fuel for anti-bank protesters. It also could spark calls for prosecutions of major players in the financial crisis.
According to court documents, even some bank executives questioned the decision not to disclose, warning that could be a criminal offense.
Neither Bank of America nor the plaintiffs' attorney returned our request for comment on the lawsuit.