Bank of America Corp agreed to give regulators more information about why it refrained from disclosing details about Merrill Lynch's performance before it bought the investment bank, federal regulators said on Tuesday.
The agreement, still subject to court approval, would allow the U.S. Securities and Exchange Commission to look at details on the bank's failure to disclose information to shareholders about Merrill's $15.8 billion fourth-quarter losses and bonuses paid to Merrill employees.
The bank faces an array of lawsuits and investigations by lawmakers and regulators. New York Attorney General Andrew Cuomo has threatened to sue bank officers and is seeking more information on who knew what prior to the December 5 shareholder vote to approve the merger.
Under the SEC pact, Bank of America would waive its attorney-client privilege that protects the names of those who made decisions on the Merrill merger.
Attorney-client privilege is a very important business principle but given the pressure in several inquiries for further insight we decided to waive it in this matter, said Bank of America spokesman Larry Di Rita.
We have nothing to hide and believe our actions throughout the Merrill Lynch acquisition were appropriate and in the best interest of our shareholders, he said.
Last month, a federal judge rejected Bank of America's $33 million settlement with the SEC, which alleged it misled investors about $3.6 billion of bonuses paid to Merrill employees.
U.S. District Court Judge Jed Rakoff faulted the SEC for accepting the bank's effort to invoke attorney-client privilege and avoid disclosing what executives and lawyers knew about its authorization to pay the bonuses.
If the pact is approved, the SEC would have access to information on the bank's decisions about whether to disclose impairment of goodwill of Merrill and other financial results of Merrill Lynch during the fourth quarter of fiscal year 2008.
The agreement would give the SEC access to the bank's communications with the Federal Reserve and the Treasury Department, which helped broker the deal and buttress the bank with taxpayer funds.
That would likely include communications between departing Bank of America CEO Ken Lewis who was at the center of negotiations with federal regulators.
The order would allow the SEC to share the information from Bank of America with other government authorities including federal and state regulators, the SEC said.
The bank announced at the end of last month that 62-year-old Lewis will retire by the end of the year. His reputation has been badly bruised by government investigations into the Merrill acquisition, as well as massive credit losses that led the bank to take two rounds of U.S. bank bailout funds.
Bank of America is searching for a successor with a view to appointing a replacement before Lewis leaves. Possible candidates include Brian Moynihan, head of consumer banking, and Joe Price, the bank's chief financial officer.
Lewis had previously said he wanted to stay at the bank until it had returned the $45 billion in government funds it received.
(Reporting by Rachelle Younglai, Elinor Comlay, Dan Wilchins, editing by Dave Zimmerman)