Bank of America Chairman and Chief Executive Kenneth Lewis was issued a subpoena by New York State Attorney General Andrew Cuomo, who is investigating whether the bank withheld information from investors in violation of state law, according to people familiar with the matter.
Mr. Lewis, who received the subpoena late last week, is the highest-profile subject of Mr. Cuomo’s investigation into the Charlotte, N.C., bank’s purchase of Merrill Lynch & Co. on Jan. 1. Mr. Cuomo’s office is trying to determine if investors were misled about the depth of Merrill’s losses in late 2008 and whether details of the bonuses to Merrill employees, contained in a nonpublic document, should have been disclosed to investors.
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Associated Press
Bank of America Chief Executive Ken Lewis, center, testified on Capitol Hill on Feb. 11. Mr. Lewis has been subpoenaed by New York state over bonuses and losses at Merrill Lynch.
A BofA spokesman declined to comment on the subpoena.
Investigators also took testimony from former Merrill CEO John Thain on Thursday. Mr. Thain was questioned all day, say the people familiar with the matter. They asked Mr. Thain about the nature of some $4 billion in bonuses to employees.
In particular, they wanted to know why the September merger agreement contained a nonpublic attachment that outlined the maximum Merrill could pay. A Thain spokesman declined to comment.
The person close to the matter said regulators are turning their attention to Mr. Lewis and are looking at his testimony to Congress earlier this month when he said he had “no authority” over bonuses given they were detailed in the merger agreement and part of the bonuses were paid in Bank of America stock.
Mr. Cuomo’s investigators are exploring how Merrill could have set and then informed employees about the bonuses before the quarter closed, according to a person familiar with the matter. They are probing whether trading losses were adequately disclosed to shareholders and boards of each company and what the top executives approving the bonuses knew about the losses.
Many of these issues are typically investigated by the Securities and Exchange Commission. But as the chief regulator in Wall Street’s home state, Mr. Cuomo has wide powers to look at wrongdoing in the securities industry.
Bank of America chief administrative officer J. Steele Alphin and Andrea Smith also were subpoenaed. Ms. Smith was involved in setting compensation of several top Merrill executives.
Bank of America shares fell another 14% Thursday, closing at $3.93 amid recurrent fears the bank could be nationalized.
Mr. Lewis addressed the nationalization speculation during a senior leadership meeting Thursday at the bank’s headquarters, according to a person there. Policy officials in Washington have assured Mr. Lewis that such an option isn’t on the table, the CEO said. He also said he has urged the government to say this publicly.
Write to Susanne Craig at susanne.craig@wsj.com and Dan Fitzpatrick at dan.fitzpatrick@wsj.com
Printed in The Wall Street Journal, page C1
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