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Ken Lewis to Step Down at Year-end

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Bank of America CEO Ken Lewis announced that he would retire from the bank at the end of the year, according to a Sept. 30 company announcement.

Lewis and Bank of America have been in the spotlight since the merger/rescue of the wounded Merrill Lynch during the height of the market and economic crisis in 2008. A successor has not been named.

In rescuing the hobbled broker/dealer Merrill Lynch from failure during the worst part of the markets crisis, Lewis and Merrill’s then chief John Thain looked like heroes on September 15, 2008 when the takeover was announced, especially after Lehman Brothers did fail. But there has been some question about whether Lewis paid too much for Merrill, which lost billions of dollars in the fourth quarter of 2008, but still paid out billions in bonuses.

Where the bonuses adequately disclosed? That’s a subject of contention between the SEC and Bank of America executives and their counsel. It’s also the subject of an unusual ruling on a proposed settlement between the bank and SEC that was rejected on Sept. 14 by Judge Jed Rakoff. (See related articles and blogs below.) Rakoff has instructed the SEC and Bank of America to prepare for trial on that issue in February 2010.

New York Attorney General Andrew Cuomo’s office stated on Sept. 30 that “Ken Lewis’ decision to step down will have no impact on our continuing investigation.” Cuomo is “making charging decisions” in connection with its investigation of the Bank of America-Merrill Lynch merger, and his office sent a letter to Lewis J. Liman, the bank’s attorney, on Sept 9, saying: “I write regarding our ongoing investigation concerning Bank of America’s merger with Merrill Lynch. We are at the stage in our investigation in which we are making charging decisions with respect to Bank of America and its executives. However, Bank of America’s indiscriminate invocation of the attorney-client privilege is hindering this Office’s ability to make fair and fully informed decisions as to what charges, if any, to bring and whether individual Bank of America officers should be charged.”

More on Bank of America Merrill Lynch:

Rakoff’s Bank of America Opinion: “The Tipping Point”

September 16, 2009

In September 2013 when we look back on Lehman Bothers’ demise, will we also see a “reformed” financial system and regulatory structure? One that may be hard to recognize compared to today’s structure? If “yes,” look to Judge Jed S. Rakoff’s opinion.

SEC-Bank of America Settlement “Does not Comport”

September 15, 2009

Judge Jed S. Rakoff of the United States District Court of the Southern District of New York has thrown out a proposed settlement between the SEC and Bank of America.

Disclosures and Evoking the Lewis Liman Defense

August 14, 2009

Why did the SEC accept a $33 million settlement in light of its allegations that Bank of America failed to disclose that bonus payments were authorized for up to $5.8 billion? Judge Jed Rakoff wants to know.