New York's attorney general charged Bank of America Corp , former Chief Executive Kenneth Lewis and former Chief Financial Officer Joe Price with fraud for allegedly misleading shareholders about the bank's acquisition of Merrill Lynch & Co.

Separately, the U.S. Securities and Exchange Commission said the largest U.S. bank agreed to pay a $150 million civil fine and strengthen disclosure and corporate governance to settle its two lawsuits alleging poor disclosure of Merrill's losses and bonus payouts. The accord requires court approval.

Invoking a powerful state law used to combat securities fraud, New York Attorney General Andrew Cuomo filed a civil lawsuit on Thursday accusing Bank of America, Lewis and Price of intentionally failing to disclose massive losses at Merrill prior to a December 5 shareholder vote on the merger.

Cuomo alleged that after concealing the losses, the defendants misled the federal government in claiming that a surprise increase in Merrill's losses would allow Bank of America to back out of the merger if it did not get massive taxpayer help.

While Merrill lost $15.8 billion in the fourth quarter of 2008, just $1.4 billion occurred between the shareholder vote and when the bank starting to ring alarm bells in Washington, Cuomo said.

The behavior is just egregious and reprehensible, Cuomo said on a conference call. His office said the bank's current chief executive, Brian Moynihan, is not under investigation.

Bank of America ultimately got $20 billion of federal bailout money from the Troubled Asset Relief Program, which the Charlotte, North Carolina-based lender has since repaid.

Change is so obviously needed at Bank of America, lamented Neil Barofsky, the TARP special inspector general, on the conference call.

SERIOUS BLOW

Bank of America spokesman Bob Stickler called the charges regrettable and said they lack merit.

The evidence demonstrates that Bank of America and its executives, including Ken Lewis and Joe Price, at all times acted in good faith and consistent with their legal and fiduciary obligations, he said.

Lewis' lawyer Mary Jo White, a former U.S. Attorney in New York and now a partner at Debevoise & Plimpton LLP, called the decision to sue badly misguided, saying: There is not a shred of objective evidence to support the allegations.

William Jeffress, a partner at Baker Botts LLP who represents Price, said his client also denied Cuomo's charges, adding that the allegation that he had deliberately pushed the bank to withhold information from shareholders was utterly false.

Price recently became head of consumer and small business banking at Bank of America, while Lewis retired at the end of 2009 after a 40-year career at the bank.

This is a serious blow for the bank, said Tony Plath, a finance professor at the University of North Carolina at Charlotte. This doesn't look like it's going to go away anytime soon.

BONUSES

Cuomo, the SEC and Congress have long attacked the handling of the Merrill merger, which was put together over a weekend and announced on September 15, 2008, the same morning that Lehman Brothers Holdings Inc went bankrupt.

Critics have said Bank of America kept shareholders from learning of Merrill's losses on a timely basis and concealing that it had authorized the payment of $3.6 billion of bonuses.

Throughout this episode, the conduct of Bank of America, through its top management, was motivated by self-interest, greed, hubris, and a palpable sense that the normal rules of fair play did not apply to them, the complaint said.

Management thought of itself as too big to play by the rules and, just as disturbingly, too big to tell the truth, it added.

David Markowitz, head of New York's investor protection bureau, on the conference call said Moynihan has been candid with our office as to the role he played in the merger after he was named the bank's general counsel in mid-December 2008.

SEC SETTLEMENT

The SEC settlement directs the $150 million penalty to go into a fund that would be distributed to Bank of America shareholders.

It also calls for several governance and disclosure changes, including continuing to give shareholders a voice on executive pay and taking extra steps to insure that directors on its compensation committee remain independent.

Terms of the settlement provide an effective means of corporate reform that would help to avoid future violations, SEC lawyer Scott Black wrote in a court filing.

The accord requires approval by U.S. District Judge Jed Rakoff. In September, he rejected a $33 million SEC settlement with the bank, in part because it did not hold individuals -- including bank executives, bank directors and outside lawyers -- responsible for disclosure failures.

Cuomo's lawsuit attempts to do that, and bring people to justice, the attorney general said. The benefit of a settlement is you have an immediate action, you can implement immediate reforms, he added.

Rakoff is still scheduled to hold a hearing on SEC litigation against the bank on Monday afternoon.

In afternoon trading, Bank of America shares were down 60 cents, or 3.9 percent, at $14.93 on the New York Stock Exchange. They last traded at $33.74 before the Merrill acquisition was announced.

The New York case is New York v. Bank of America Corp et al, New York State Supreme Court, New York County. The SEC cases are SEC v. Bank of America Corp, U.S. District Court, Southern District of New York, Nos, 09-06829 and 10-00215.

(Reporting by Joe Rauch in Orlando, Florida and Jonathan Stempel in New York; Additional reporting by Elinor Comlay and Steve Eder in New York, and Rachelle Younglai in Washington; editing by John Wallace and Gerald E. McCormick)

Bank of america Merrill Lynch Lehman brothers New York