Bank of America's top executives neglected to tell their shareholders about the losses at Merrill Lynch before completing the $50 billion purchase of the company in 2008. Shareholders were instead told of projections showing the deal would make money, when in fact it resulted in losses that prompted the $20 billion taxpayer bailout.
The information was revealed through documents filed on Sunday night for a Bank of America shareholder lawsuit, which includes testimony from then-Chief Executive Kenneth Lewis, admitting that the documents filed with regulators and shareholders before the acquisition vote didn't include the loss estimates he had previously received. At the bank board's next meeting just days after the decision, they were given news that there had been a $14 billion before tax loss in the fourth quarter. The lawsuit will be heard in Federal District Court in Manhattan.
Two business days after Bank of America shareholders approved the deal, the bank’s board met and received details of the $14 billion pretax fourth-quarter loss. The board also learned that the deal would be far more damaging to the bank’s earnings than had been publicly disclosed.
One bank executive attending that meeting was Timothy Mayopoulos, then Bank of America’s general counsel. In testimony noted in the court filing, Mr. Mayopoulos expressed surprise at the size of the loss, which he said he had not been told about. He testified that he tried to speak with Mr. Price about possibly disclosing the losses but that Mr. Price was not available.
The next day, the filing noted, Mr. Mayopoulos was “fired without explanation and immediately escorted from
the premises, without being given the opportunity to collect his personal belongings.”
And just a reminder...