On the judge’s demand, Bank of America and the SEC have now turned over to the court some of the documents exchanged and depositions taken during their litigation, allowing a more detailed picture of what happened during the heady days of the Merrill merger.
Ken Lewis’ deposition reveals he knew of the decision not to disclose to shareholders Merrill’s growing losses, The Wall Street Journal reported.
BofA’s then finance chief twice briefed Lewis about the losses and Wachtell’s disclosure advice; the second briefing was December 3, two days before shareholders approved the deal.
Quoting deposition testimony, the WSJ noted that Lewis would not provide an opinion about whether shareholders should have been told about the losses: “after that extensive…dive ito it, I would not think I would be qualified to say what was or what was not,” Lewis testified.
So what was that advice, after said extensive dive? Zach Lowe of The Am Law Daily said that the discovery shows “that [Wachtell] and BofA agreed fairly quickly on disclosure issues related to [Merrill’s] fourth-quarter 2008 losses.”
The papers, nearly 1,000 pages-worth, “portray a universal consensus” on the issue, Lowe wrote, a fact that “contrasts sharply with the narrative that New York Attorney General Adrew Cuomo has presented in his lawsuit against BofA and three top executives.”
Though we continue to be surprised that BofA so readily used the “we relied on our attorneys” defence to the extent that they did — so much so, in fact, that they agreed to waive attorney-client privilege — the discovery so far indicates little internal struggle over the question of disclosing the growing losses.
Executives like Lewis of course rely on legal advice like this all the time — they pay thousands and thousands for it, and there are few lawyers as top notch as those at Wachtell, including Ed Herlihy and Nicholas Demmo, who lead the firm’s team.
But it’s still the executive’s call, and presumably they understand the rules enough to evaluate the advice and make the call — the buck stops with them, as it should.
But maybe in this case BofA took the “lawyer’s advice” defence because it does not seem anyone felt it was a controversial one at the time. It’s also interesting the focus of this suit, and Judge Rakoff’s questions, has been trying to uncover internal disagreement and trying to dig out the person who thought disclosure was necessary. If that person is not revealed, the only question will left will be, “Was the advice wrong?”
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