MANHATTAN (CN) - As Bank of America agreed to pay $150 million to settle SEC charges that it failed to disclose controversial Merrill Lynch bonuses and financial losses, New York's attorney general accused the bank of lying to shareholders before the $50 billion merger. State Attorney General Andrew Cuomo says the bank's executives were "motivated by self-interest, greed, hubris, and a palpable sense that the normal rules of fair play did not apply to them."
The bank announced the settlement with the SEC on Thursday, the same day that Cuomo filed suit in New York Supreme Court. Cuomo claims the bank's management "misled its shareholders by not disclosing massive losses that were mounting at Merrill Lynch so that shareholders would vote to approve the deal."
"Once the deal was approved, Bank of America's management manipulated the federal government into saving the deal with billions in taxpayer funds by falsely claiming that they intended to back out of the deal," the lawsuit claims.
"Ultimately, this was an enormous fraud on taxpayers who ended up paying billions for Bank of America's misdeeds," Cuomo says.
The SEC had accused BofA of authorizing up to $5.8 billion in bonuses just before the companies merged in 2008, but telling shareholders that bonuses were out of the picture.
The $150 million penalty, if approved by U.S. District Judge Jed Rakoff, will be distributed to Bank of America shareholders harmed by the bank's alleged disclosure violations. The SEC will propose a distribution plan later. Bank of America also will be required to strengthen its corporate governance.
Rakoff previously rejected a proposed $33 million SEC settlement over the bonuses as "worth than pointless," saying it made no sense to "further victimize the victims" by making shareholders pay for executives' alleged lies.
According to Cuomo, the bank's top management "thought of itself as too big to play by the rules and, just as disturbingly, too big to tell the truth."
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