The Office of the Special Inspector General for the Troubled Asset Relief Program [1] (SIGTARP) announced that a $7.5 million settlement has been reached with Bank of America's [2] former CFO, Joe Price, regarding the bank's actions as it sought to merge with Merrill Lynch & Co. in 2008.
As part of the settlement, Price is barred from serving as an officer or director of a public company for 18 months.
The agency commented that on March 26, 2014, a $25 million settlement had been reached with Bank of America and its former chairman and CEO, Kenneth Lewis. Lewis, as a part of that particular settlement, was also barred from serving as an officer or director for a public company for three years.
"Despite Bank of America top executives' specific knowledge of mounting losses at Merrill Lynch that were forecast at more than $9 billion, the TARP recipient bank failed to disclose that information to shareholders prior to their vote on the proposed merger. It was also alleged that Lewis and Price misrepresented to shareholders the impact that the merger with Merrill would have on Bank of America's future earnings," SIGTARP noted.
"One of the legacies of the TARP bailout is the dangerous concept of moral hazard: The belief that someone can play by their own set of rules without worry about facing the consequences of their actions because taxpayers will bail them out," said Christy Romero, Special Inspector General.
After a lengthy investigation into Bank of America and its top executives, the bank and two of its top executives were sued by then-Attorney General Andrew Cuomo. The lawsuit alleged withholding financial information from investors, while simultaneously asking shareholders to approve a merger with Merrill Lynch. Despite concealing the losses, the bank then sought "massive financial assistance" from the federal government, claiming that there had been a "material adverse change" in Merrill's financial condition.
"Bank of America continued to conceal Merrill's forecast losses until mid-January 2009, when disclosure of Merrill's multibillion-dollar fourth quarter losses led to a $50 billion sell-off in shares of Bank of America," the agency noted.
Bank of America received $15 billion in federal funds through TARP in 2008, and an additional $30 billion in 2009. The bank repaid taxpayer's on December 9, 2009.