Andrew Cuomo Files Martin Act Suit against Kenneth Lewis
New York Attorney General Andrew Cuomo has filed a Martin Act suit against former Bank of America CEO Kenneth Lewis, whom Cuomo is accusing of defrauding both investors and the government when BofA bought Merrill Lynch. Andrew Cuomo claims that Kenneth Lewis knew about Merrill Lynch's inflated bonus structure before the acquisition. BofA bought Merrill Lynch using Federal bailout money.
The Martin Act (New York General Business Law article 23-A, sections 352-353) was passed in 1921. The Martin Act gives power to the state attorney general to override the right to counsel and the right against self-recrimination when questioning someone of financial fraud charges. The Martin Act is the most far-reaching law of its kind in any US state.
Cuomo is pursuing individuals at the bank while the U.S. Securities and Exchange Commission has declined to do so. The suit is being filed under the Martin Act, a New York securities law that permits both civil and criminal penalties.
Kenneth Lewis claims he was under pressure from the federal government to make the deal happen, as the collapses of several financial institutions were already underway. Fed chief Ben Bernanke has defended the deal, despite Merrill Lynch's obviously overinflated price.
BofA paid $29 a share for Merrill Lynch, a price later criticized when it became clear Mother Merrill had a real value of $1 a share.