Cuomo Subpoenas Bank of America Directors

NEW YORK, Sept. 16 -- New York Attorney General Andrew M. Cuomo subpoenaed five Bank of America directors Wednesday as investigators prepare to file charges against the bank's senior executives in connection with its acquisition of Merrill Lynch, according to a source familiar with the investigation.

Investigators believe the five directors, among the 16 who were on the board as the deal was being discussed, have the most knowledge relevant to the inquiry, which focuses on whether Bank of America shareholders were misled about Merrill's financial condition and executive bonuses before voting last December to approve the deal. Cuomo plans to subpoena most, if not all, of the directors over the next several weeks, said the source, who spoke on the condition of anonymity because the investigation is ongoing. Bank of America chief executive Kenneth D. Lewis has already testified.

Board members will be asked about whether the bank withheld material information from shareholders, including the $15 billion in additional losses at Merrill that were disclosed weeks after the merger, as well as the $3.6 billion in bonuses it paid to employees shortly before the deal closed. The directors will also be asked about their role in determining what information to disclose and the pressure the bank may have received from government officials in the weeks leading up to the merger, the source said.

"We will continue to cooperate with the attorney general's office as we maintain that there is no basis for charges against either the company or individual members of the management team," a Bank of America spokesman said in a statement.

Cuomo's probe is one of several investigations into Bank of America's acquisition of the troubled investment bank. The Securities and Exchange Commission had reached a $33 million settlement with Bank of America over accusations that the bank failed to adequately disclose Merrill's bonus plans. But a federal judge on Monday rejected the agreement, which would have allowed the company to settle the charges without admitting fault, saying that it would essentially force the cost of the case onto the bank's shareholders, the alleged victims in the case.

Bank of America agreed to buy Merrill Lynch in a hurried deal backed by the federal government during the worst of the financial crisis. Cuomo has criticized Merrill for "secretly" moving up its bonus payments to December, shortly before shareholders voted on the deal and a quarterly loss of $15 billion was disclosed.

A source close to the investigation said earlier this week that Cuomo's office is in the final stages of drawing up charges against senior Bank of America executives.