New York's attorney general has subpoenaed five directors of Bank of America Inc., opening up a new phase in a multi-jurisdictional investigation into the bank's purchase of Merrill Lynch & Co.
Andrew Cuomo, the attorney general, has been examining whether Bank of America broke state laws when it failed to tell shareholders that it had promised to pay Merrill executives as much as $5.8 billion in bonuses once the deal was complete.
Earlier this week, a federal judge in New York rejected a $33 million settlement with the Securities and Exchange Commission over the transaction, calling it a "contrivance designed to provide the SEC with the facade of enforcement and the management of the bank with a quick resolution of an embarrassing inquiry."
In the federal hearings, Bank of America officials blamed their own lawyers for approving the final proxy language. Because of attorney-client privilege, however, it is unlikely that investigators will be able to interview them.
Cuomo has subpoenaed board members in an attempt to find out if they met their obligations to shareholders. Those asked to cooperate include members of the bank's audit committee, which was charged with reviewing the matter from a legal standpoint.
"A big unanswered question is - where were the boards?" Cuomo said in an email exchange with the New York Times. "Were they misled, or were they little more than rubber stamps for management's decision-making."
Cuomo plans to subpoena all fifteen current board members in coming weeks, the paper reported.
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