Thursday
Jun112009
Bank of America CEO Grilled By Oversight Committee
Thursday, June 11, 2009 at 4:41PM
By Annie Berman -- Talk Radio News Service
Bank of America CEO Ken Lewis apparently did not disclose information about Merrill Lynch’s huge losses to his shareholders before the announcement of the company’s merger earlier this year.
“We hope to better understand what happened in the four months between September 15, 2008, when the merger was announced, and January 16, 2009, when the public learned that Bank of America had received $20 billion in taxpayer money,” said Rep. Edolphus Towns (D-N.Y.), during a hearing with the Committee on Oversight and Government Reform.
Previously, Lewis had claimed that the government told him that he would be terminated, along with his board, if he did not keep quiet about the deep financial difficulties at Merrill Lynch.
“Just nine days after the shareholders voted, he discovered a $12 billion loss at Merrill Lynch. Mr. Lewis then told Treasury Secretary Hank Paulson that he was strongly considering backing out of the deal. According to Mr. Lewis, Paulson ultimately told him that if he didn’t go through with the acquisition, then the board would be fired,” said Towns in his opening statements, citing a disposition taken by New York Attorney General Andrew Cuomo.
Bank of America disclosed Merrill Lynch’s 2008 fourth quarter loss of $13.1 billion more than a month after Bank of America shareholders voted to approve the merger on December 5, 2008.
On September 15, 2008, it was announced that the merger between Bank of America and Merrill Lynch would proceed. On January 16, 2009, it was announced that Bank of America had received $20 billion in Troubled Assets Relief Program (TARP) money.
Lewis apparently wanted to use a Material Adverse Change Clause (MAC) to terminate the merger of the two companies.
A MAC clause gives the buyer the power to terminate a contract if the buyer feels that the assets it is acquiring are in trouble or are detrimental to the buyer.
Lewis claims to have been surprised by the huge losses suffered by Merrill Lynch.
Rep. Gerry Connolly (D-Va.) asked Lewis when he decided to disclose the losses. Lewis responded by saying “I don’t decide on disclosures. We have securities lawyers and many times they talk to external counsels to determine that…we disclosed the losses at Merrill Lynch consistent with the agreement and consistent with announcing our earnings on January 16, 2009.”
Towards the close of the hearing, Rep. Dennis Kucinich (D-Ohio) challenged Lewis, telling the CEO that he had to have known about the Merrill Lynch losses before the merger, and that using a MAC clause was not credible.
Bank of America CEO Ken Lewis apparently did not disclose information about Merrill Lynch’s huge losses to his shareholders before the announcement of the company’s merger earlier this year.
“We hope to better understand what happened in the four months between September 15, 2008, when the merger was announced, and January 16, 2009, when the public learned that Bank of America had received $20 billion in taxpayer money,” said Rep. Edolphus Towns (D-N.Y.), during a hearing with the Committee on Oversight and Government Reform.
Previously, Lewis had claimed that the government told him that he would be terminated, along with his board, if he did not keep quiet about the deep financial difficulties at Merrill Lynch.
“Just nine days after the shareholders voted, he discovered a $12 billion loss at Merrill Lynch. Mr. Lewis then told Treasury Secretary Hank Paulson that he was strongly considering backing out of the deal. According to Mr. Lewis, Paulson ultimately told him that if he didn’t go through with the acquisition, then the board would be fired,” said Towns in his opening statements, citing a disposition taken by New York Attorney General Andrew Cuomo.
Bank of America disclosed Merrill Lynch’s 2008 fourth quarter loss of $13.1 billion more than a month after Bank of America shareholders voted to approve the merger on December 5, 2008.
On September 15, 2008, it was announced that the merger between Bank of America and Merrill Lynch would proceed. On January 16, 2009, it was announced that Bank of America had received $20 billion in Troubled Assets Relief Program (TARP) money.
Lewis apparently wanted to use a Material Adverse Change Clause (MAC) to terminate the merger of the two companies.
A MAC clause gives the buyer the power to terminate a contract if the buyer feels that the assets it is acquiring are in trouble or are detrimental to the buyer.
Lewis claims to have been surprised by the huge losses suffered by Merrill Lynch.
Rep. Gerry Connolly (D-Va.) asked Lewis when he decided to disclose the losses. Lewis responded by saying “I don’t decide on disclosures. We have securities lawyers and many times they talk to external counsels to determine that…we disclosed the losses at Merrill Lynch consistent with the agreement and consistent with announcing our earnings on January 16, 2009.”
Towards the close of the hearing, Rep. Dennis Kucinich (D-Ohio) challenged Lewis, telling the CEO that he had to have known about the Merrill Lynch losses before the merger, and that using a MAC clause was not credible.
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