Bank of America failed to meet a Monday deadline to hand lawmakers further details about its acquisition of Merrill Lynch and faces the possibility of new charges from U.S. securities regulators.
The standoff with the House oversight committee heightened the chances lawmakers may subpoena the bank and raised the stakes for a Tuesday meeting between a senior bank executive and the committee chairman.
Separately, the Securities and Exchange Commission said it could pursue additional charges against Bank of America after a federal judge last week rejected a $33-million settlement between the bank and the regulator.
An SEC statement made no mention of dropping the case that alleges Bank of America misled investors over bonuses paid to Merrill Lynch employees. We believe that this disclosure failure violated the federal securities laws, the agency said.
Bank of America is defending itself on multiple fronts over the Merrill deal, including shareholder lawsuits and a threat by New York Attorney General Andrew Cuomo to file civil charges against top executives.
Despite its legal battles, Bank of America announced on Monday it would exit a $118-billion asset-guarantee program it entered with the U.S. government on the heels of its January 1 purchase of Merrill Lynch.
Charlotte, North Carolina-based Bank of America said it will pay a $425-million fee to exit the facility that was never formally signed but was laid out in a term sheet in January.
Shares of Bank of America, which had closed 2.2 percent lower to $17.25 in regular trading Monday, were 4 cents higher in after-hours trade following word of its exit from the government support program and the SEC statement.
SUBPOENA COULD BE ISSUED
An aide with the House oversight panel said its chairman was disappointed Bank of America missed the Monday noon deadline, especially after it submitted reams of unhelpful documents such as an announcement of an annual nut sale featuring This Year's Crop of Mammoth Pecan Halves.
The subpoena is the next logical step, said the aide, speaking on condition of anonymity.
Edolphus Towns' House Oversight and Government Reform is investigating details surrounding Bank of America's purchase of Merrill Lynch, including the disclosure of pre-merger losses at the investment bank, what funding commitments the U.S. government made prior to the deal and what legal basis the bank may have had for backing out of the transaction.
Some lawmakers believe Bank of America was forced by the U.S. Treasury and the Federal Reserve to go through with the Merrill deal as part of efforts to prop up the banking system during last year's financial crisis.
Others are critical of Bank of America for not giving more information to shareholders about Merrill's financial condition and for letting Merrill pay bonuses before the deal was completed on January 1.
We are working with the committee on a plan to provide them with the information they need, Bank of America spokesman Scott Silvestri said in an emailed statement.
Anne Finucane, the bank's global chief strategy and marketing officer, will meet with Towns on Tuesday to discuss providing the necessary documents without violating attorney client privilege, Silvestri said.
The committee has said information relevant to the investigation be disclosed, and the bank must waive attorney-client privilege to do so.
The committee aide said Towns will hear what Bank of America has to say, but he was not expected to back down from his request for the documents.
In a September 18 letter to Bank of America Chief Executive Ken Lewis, Towns said the bank has produced documents clearly irrelevant to an August request by the committee for all records from September 1, 2008 through January 16, 2009.
Those documents included an invitation to attend an East Asian investment conference, written in Chinese, emails from employees to Ken Lewis about his 'awesome' performance on 60 Minutes, and emails to employees about company discounts at retailers.
(Reporting by Joe Rauch and Rachelle Younglai; Editing by Tim Dobbyn)