AP Source: NY AG Subpoenas 5 BofA Board Members

By: Stephen Bernard AP Email
By: Stephen Bernard AP Email

NEW YORK (AP) - The New York Attorney General's office subpoenaed five members of Bank of America Corp.'s board of directors Wednesday as part of an investigation into the bank's acquisition of Merrill Lynch & Co., according to a personal familiar with the investigation.

The board members are expected to be questioned about what they knew regarding the mounting losses and bonus payments at Merrill ahead of the deal's completion on Jan. 1, said the person, who asked for anonymity because the investigation is ongoing. It wasn't immediately clear which directors received the subpoenas.

New York Attorney General Andrew Cuomo's office is also likely to ask the board members about any threats made by federal regulators to remove the board if the deal wasn't completed, as BofA executives have said.

The subpoenas come as Cuomo's office is preparing to file fraud charges in the coming weeks against several high-ranking executives
at the Charlotte, N.C.-based bank over its acquisition of the troubled investment bank.

Bank of America agreed to acquire Merrill Lynch in a hurried deal almost exactly one year ago at the height of the financial crisis, just as Lehman Brothers was about to file for bankruptcy. It was later revealed that Merrill, with the knowledge of Bank of America executives, paid Merrill employees $3.6 billion in bonuses just before the deal closed at the beginning of this year.

BofA had settled a separate investigation last month into disclosures about the Merrill bonuses with the Securities and Exchange Commission, but on Monday a federal judge threw out that $33 million settlement saying it "cannot remotely be called fair" and needlessly penalized BofA shareholders. The judge ordered the case to go to trial Feb. 1.

Merrill wound up paying the bonuses for 2008 despite losing $27.6 billion that year, a record for the firm. Those losses affected the bottom line at Bank of America, one of the largest recipients of U.S. government bailout funds.

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