Nightly News   |  February 04, 2010

BofA execs face fraud charges

New York's Attorney General filed securities fraud charges against Bank of America's former CEO Ken Lewis and the bank's former Chief Financial Officer on Thursday. NBC News Senior Investigative Correspondent Lisa Myers reports.

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BRIAN WILLIAMS, anchor: And with all this going on in Wall Street , New York 's attorney general was filing civil fraud charges against the CEO of Bank of America -- former CEO Ken Lewis , and the bank's former chief financial officer. They are the first senior managers to face charges in the wake of the financial meltdown. Our own senior investigative correspondent, Lisa Myers reports on the fallout.

LISA MYERS reporting: The civil fraud charges against Bank of America and former CEO Ken Lewis stem from the bank's takeover of Merrill Lynch in 2008 .

Mr. KEN LEWIS: Certainly the Merrill Lynch acquisition, in particular, came with risk.

MYERS: Lewis and the bank are accused of misleading investors by hiding massive losses at Merrill Lynch , even as shareholders voted on the deal, and of manipulating the federal government into providing a $20 billion bailout to help deal with the losses. The complaint calls this "an enormous fraud on taxpayers" and claims the bank and top management were motivated by "greed, hubris, and a palpable sense that the normal rules of fair play don't apply to them." Legal experts call this a significant development.

Professor JOHN COFFEE (Columbia Law School): I think the American public wants accountability. This is the first time that anyone is seeking to hold responsible senior executives at a major bank.

MYERS: It came as the Securities and Exchange Commission moved to settle federal charges against Bank of America for concealing losses and bonuses. The bank agreed to pay a $150 million penalty to shareholders. This still must be approved by a judge. The tougher fraud charges were brought by New York attorney general Andrew Cuomo , who was joined by the federal top cop for the bailout program, Neil Barofsky . Experts say it indicates they think the SEC didn't go far enough.

Prof. COFFEE: This does read as a kind of implied criticism of the SEC .

MYERS: A spokesman for Bank of America called the fraud charges "totally without merit" and said all involved acted in good faith under difficult conditions. Lewis ' lawyer says there's not a shred of objective evidence to support the charges against him and that Lewis has been unfairly vilified in the political search to assign blame for the financial meltdown. Lisa Myers, NBC News, Washington.