Bank of America's Response To Cuomo's Fraud Charges

FILED: NEW YORK COUNTY CLERK 08/18/2010 INDEX NO.
450115/2010
NYSCEF DOC. NO. 6 RECEIVED NYSCEF: 08/18/2010
SUPREME COURT OF THE STATE OF NEW YORK

COUNTY OF NEW YORK
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THE PEOPLE OF THE STATE OF NEW :
YORK By ANDREW M. CUOMO, Attorney :
General of the State of New York, :
: Index No. 450115/2010
Plaintiff, :
:
-against- : ANSWER OF DEFENDANT
: BANK OF AMERICA
BANK OF AMERICA CORPORATION, : CORPORATION
KENNETH D. LEWIS and JOSEPH L. :
PRICE, :
:
Defendants. :
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Pursuant to New York Civil Practice Law and Rules (“CPLR”) 3018,
Bank of America Corporation (“Bank of America”), by its undersigned attorneys, files
this Answer to the Complaint of the Attorney General of the State of New York (the
“Attorney General”) dated February 4, 2010. All allegations, including headings and
subheadings, not specifically admitted are hereby denied.
RESPONSES TO ALLEGATIONS OF THE ATTORNEY GENERAL
1. Bank of America contends that paragraph 1 contains no factual
allegations to which an answer can be given, and to the extent that any response to such
allegations is necessary, denies the allegations in paragraph 1, except admits that Bank of
America agreed to merge with Merrill Lynch & Co., Inc. (“Merrill Lynch”) in September
2008 (the “Merger”).
2. Bank of America denies the allegations in paragraph 2, except
admits that Bank of America agreed to merge with Merrill Lynch pursuant to an
agreement dated September 15, 2008 (the “Merger Agreement”); that the Merger was
announced on Monday, September 15, 2008; and that the proxy statement filed with the
Securities and Exchange Commission on November 3, 2008 (the “Proxy Statement”) was
mailed to shareholders on or about November 3, 2008, and refers to the Proxy Statement
for a true and complete statement of its terms.
3. Bank of America denies the allegations in paragraph 3.
admits that on December 5, 2008, shareholders of Merrill Lynch voted to approve the
Merger and shareholders of Bank of America voted to authorize the issuance of shares
necessary to effect the Merger; that the Merger closed on January 1, 2009; and that
Merrill Lynch’s fourth quarter results for 2008 were timely released in accordance with
applicable law on January 16, 2009.
admits that on certain dates after the announcement of the Merger in September 2008,
certain employees of Bank of America received certain preliminary, estimated, and
forecasted financial information relating to Merrill Lynch’s financial performance in the
fourth quarter of 2008.
admits that on November 13, 2008, Timothy Mayopoulos, then Bank of America’s
General Counsel, and lawyers from Wachtell, Lipton, Rosen & Katz, among others,
discussed disclosure issues relating to Merrill Lynch’s financial performance in the fourth
quarter of 2008.
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admits that on December 3, 2008, Joe Price and Kenneth Lewis participated in a
discussion relating to Merrill Lynch’s fourth quarter 2008 forecast, and that Mr. Price
received disclosure advice from Mr. Mayopoulos with respect to Merrill Lynch’s
financial performance in the fourth quarter of 2008.
admits that Mr. Mayopoulos concluded that no additional disclosure beyond that already
made by Bank of America and Merrill Lynch was necessary.
admits that the Bank of America Board of Directors met on December 9, 2008, that Mr.
Price provided summary financial information at the meeting, and that Mr. Mayopoulos
testified that he recalls a December 1, 2008 discussion with Mr. Price and Gregory Curl
at which the material adverse change (“MAC”) clause of the Merger Agreement was
discussed.1
admits that Mr. Mayopoulos’s employment was terminated on December 10, 2008; that
Brian Moynihan, currently the Chief Executive Officer of Bank of America, became
General Counsel of Bank of America on December 10, 2008 after having held several
leadership positions at Bank of America and having practiced law for many years,
1
To the extent Bank of America refers to the testimony of witnesses interviewed by the Attorney
General in this Answer, such references should not be construed as a statement concerning the
accuracy or completeness of the witness testimony as reflected in the transcripts produced by the
Attorney General.
3
including as a partner at a well-respected law firm; and that Mr. Moynihan’s bar
membership status was inactive as of December 10, 2008.
states that it lacks knowledge and information sufficient to form a belief as to the truth of
the allegations relating to advice that Deloitte & Touche LLP gave to Merrill Lynch prior
to the Merger, admits that on December 5, 2008, shareholders of Merrill Lynch voted to
approve the Merger and shareholders of Bank of America voted to authorize the issuance
of shares necessary to effect the Merger, and refers to the entirety of the testimony of
Thomas Graham and Jeffrey Brown for a true and complete understanding of its
substance.
admits that in conversations with federal officials between December 17 and 21, 2008,
Bank of America executives stated that Bank of America believed it had grounds to
invoke the MAC clause of the Merger Agreement in light of the accelerating losses at
Merrill Lynch in the days following the shareholder vote.
4
admits that the Merger closed on January 1, 2009 and that Bank of America, along with
many other financial institutions, received funds through the Troubled Asset Relief
Program in October 2008 and January 2009.
admits that Merrill Lynch paid its employees approximately $3.6 billion in aggregate
value of both cash and stock in the year-end variable incentive compensation program
(“VICP”) for 2008 and that the cash portion of such compensation was paid prior to the
closing of the Merger on January 1, 2009.
24. Bank of America denies the allegations in paragraph 24, and avers
that Bank of America and Merrill Lynch publicly disclosed, as part of the Proxy
Statement and elsewhere, the amount of overall compensation expense that Merrill Lynch
had accrued through the third quarter of 2008; that numerous media outlets, in
newspapers, on television, and over the internet, reported that Merrill Lynch was
expected to pay multi-billions of dollars in year-end incentive compensation for 2008;
and that the Proxy Statement expressly disclosed Merrill Lynch’s intention and/or
commitment to pay incentive compensation and to use its best efforts to retain key
employees.
26. Paragraph 26 states legal conclusions to which Bank of America
need not respond and/or allegations as to which Bank of America lacks knowledge and
information. To the extent any response to the allegations in paragraph 26 is necessary,
Bank of America denies them.
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need not respond. To the extent any response to those allegations is necessary, Bank of
America denies them.
admits that it transacted business and maintained an office in New York between
September 2008 and January 2009.
32. Bank of America admits the allegations in paragraph 32.
admits that Mr. Lewis was the Chairman and Chief Executive Officer of Bank of
America between September 2008 and January 2009.
admits that Mr. Price was the Chief Financial Officer of Bank of America Corporation
between September 2008 and January 2009 and that Mr. Price reported directly to Mr.
Lewis during this time period.
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admits that J. Steele Alphin was the Chief Administrative Officer of Bank of America
between September 2008 and January 2009.
admits that Richard Alsop was in-house counsel at Merrill Lynch between September
2008 and the closing of the Merger.
admits that David Belk was Senior Vice President of Bank of America’s Global
Corporate Strategy and Development group between September 2008 and January 2009
and previously worked in the Finance group.
admits that Teresa Brenner was associate general counsel at Bank of America between
admits that Mr. Brown was Bank of America’s Treasurer between September 2008 and
January 2009 and that Mr. Brown reported directly to Mr. Price during this time period.
admits that Gary Carlin was Corporate Controller at Merrill Lynch between September
2008 and the closing of the Merger.
admits that George Carp was the Business Finance Officer for Bank of America’s Global
Markets group between September 2008 and January 2009.
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admits that Nelson Chai was the Executive Vice President and Chief Financial Officer of
Merrill Lynch between September 2008 and the closing of the Merger and that Mr. Chai
reported directly to John Thain during this time period.
admits that Neil Cotty was Chief Accounting Officer of Bank of America between
admits that Mr. Curl was the Vice Chairman of Corporate Development at Bank of
America between September 2008 and January 2009, that Mr. Curl’s responsibilities
during this time period included strategic corporate planning, that Mr. Curl reported to
Mr. Lewis during this period, and that Mr. Curl was one of the negotiators for Bank of
America during the Merger negotiations with Merrill Lynch.
admits that Wachtell, Lipton, Rosen & Katz was retained by Bank of America to advise it
on legal issues related to the Merger and that Nicholas Demmo was a corporate partner at
Wachtell, Lipton, Rosen & Katz between September 2008 and January 2009.
admits that John Finnegan was the Chairman of Merrill Lynch’s Management
Development and Compensation Committee (“MDCC”) between September 2008 and
the closing of the Merger.
admits that Gregory Fleming was President of Investment Banking and Wealth
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Management at Merrill Lynch between September 2008 and the closing of the Merger;
that, prior to the Merger, Mr. Fleming was responsible for Merrill Lynch’s investment
banking and wealth management divisions and for overseeing investor relations and
human resources; that Mr. Fleming was one of the negotiators for Merrill Lynch during
Merger negotiations with Bank of America; and that Mr. Fleming reported to Mr. Thain.
admits that Charles K. Gifford was a member of Bank of America’s Board of Directors
49. Bank of America states that it lacks knowledge and information
sufficient to form a belief as to the truth of the allegations in paragraph 49 concerning
Deloitte & Touche LLP, a third party, and avers that it is Bank of America’s
understanding that Mr. Graham was a partner at Deloitte & Touche LLP between
September 2008 and the closing of the Merger.
admits that Christopher Hayward was Finance Director of Merrill Lynch between
September 2008 and the closing of the Merger and that Mr. Hayward reported to Mr.
Chai during this time period.
on legal issues related to the Merger and that Ed Herlihy was a corporate partner at
sufficient to form a belief as to the truth of the allegations in paragraph 52 concerning
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Deloitte & Touche LLP, a third party, and avers that it is Bank of America’s
understanding that Ven Kocaj was a partner at Deloitte & Touche LLP between
September 2008 and the closing of the Merger.
admits that Thomas J. May was a member of Bank of America’s Board of Directors
admits that Mr. Mayopoulos was General Counsel of Bank of America between
September 2008 and December 10, 2008 and that Mr. Mayopoulos was one of the many
attorneys who advised Bank of America regarding the Merger.
admits that certain employees of Bank of America received certain preliminary,
estimated, and forecasted financial information from Merrill Lynch, including from
Nancy Meloth, relating to Merrill Lynch’s financial performance in the fourth quarter of
2008; that Ms. Meloth was the Head of Financial Planning and Analysis in Merrill
Lynch’s Finance Department between September 2008 and the closing of the Merger;
and that she reported to Mr. Hayward during this time period.
admits that David Moser was a Managing Director and Global Head of Accounting
Policy at Merrill Lynch between September 2008 and the closing of the Merger.
admits that Mr. Moynihan was President of Global Corporate and Investment Banking
between September 2008 and December 10, 2008; that Mr. Moynihan was General
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Counsel of Bank of America from December 10, 2008 to January 22, 2009; that Mr.
Moynihan became President of Global Banking and Global Wealth and Investment
Management on January 22, 2009; and that Mr. Moynihan is currently the Chief
Executive Officer of Bank of America.
on legal issues related to the Merger and that Eric Roth was a litigation partner at
admits that Andrea Smith was a Human Resources generalist who supported various
businesses within Bank of America, including the Global Corporate Investment Bank and
the CFO group, between September 2008 and January 2009.
admits that Mr. Thain was President of Global Banking, Securities, and Wealth
Management at Bank of America from January 1, 2009 to January 22, 2009 and that Mr.
Thain was the Chairman and Chief Executive Officer of Merrill Lynch from September
2008 until the closing of the Merger.
admits that certain Bank of America executives received certain preliminary, estimated,
and forecasted financial information relating to Merrill Lynch’s financial performance in
the fourth quarter prior to December 5, 2008.
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Bank of America denies the allegations in the first paragraph of footnote 1
to paragraph 61, except admits that Bank of America conducted due diligence on Merrill
Lynch on September 13 and 14, 2008.
Bank of America denies the allegations in the second paragraph of
footnote 1 to paragraph 61, except admits that Bank of America retained the services of
J.C. Flowers & Co. LLC in connection with the proposed Merger, and avers that Bank of
America and its employees and advisors conducted adequate due diligence prior to
entering into the Merger Agreement.
Bank of America denies the allegations in the third paragraph of footnote
1 to paragraph 61, except admits that Bank of America’s Board of Directors met on
September 14, 2008 to review the terms of the proposed Merger and approved the
Merger, and refers to the e-mail referenced in the third paragraph of footnote 1 to
paragraph 61 for a true and complete statement of its contents.
Bank of America denies the allegations in the fourth paragraph of footnote
1 to paragraph 61, except admits that Bank of America and Merrill Lynch agreed to a
stock-for-stock merger at a fixed exchange ratio of .8595 and that, based upon the market
value of Bank of America and Merrill Lynch common stock on September 12, 2008, the
price represented a 70 percent premium to the closing price of Merrill Lynch’s common
stock on September 12, 2008.
admits that on November 13, 2008, General Counsel Timothy Mayopoulos consulted
with external counsel at Wachtell, Lipton, Rosen & Katz concerning any disclosure
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obligation of Bank of America concerning Merrill Lynch’s preliminary, estimated, and
forecasted financial performance in the fourth quarter of 2008.
admits that Ms. Meloth oversaw the forecasting process at Merrill Lynch, and refers to
the entirety of Ms. Meloth’s testimony for a true and complete understanding of its
substance.
65. Bank of America denies the allegations in paragraph 65, and refers
to the reports referenced in paragraph 65 for a true and complete statement of their terms.
to the reports referenced in paragraph 66 for a true and complete statement of their terms
and to the entirety of Ms. Meloth’s testimony for a true and complete understanding of its
substance.
any allegations concerning Merrill Lynch’s internal processes prior to the Merger, and
refers to the reports referenced in paragraph 67 for a true and complete statement of their
contents.
admits that in the third quarter of 2008, Merrill Lynch carried goodwill on its books, and
avers that Bank of America and the market generally were aware that as a result of
accounting rules, Merrill Lynch’s historical goodwill would be written off upon the
closing of the Merger and that this was disclosed in the Proxy Statement.
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admits that certain employees of Bank of America received certain preliminary,
estimated, and forecasted financial information relating to Merrill Lynch’s financial
performance in the fourth quarter of 2008.
admits that Ms. Meloth sent Messrs. Cotty, Carlin, and Hayward an e-mail dated
November 4, 2008 with the subject line “October month estimate on Nov 4” and that Mr.
Cotty forwarded this e-mail to Mr. Price on November 5, 2008, and refers to those e-
mails and the attachments thereto for a true and complete statement of their contents.
admits that there is an e-mail from Mr. Cotty to Mr. Price dated November 9, 2008 with
the subject line “FW: Oct-08 PL Reports as of 11/7/08,” and refers to this e-mail for a
true and complete statement of its contents.
admits that there is an e-mail from Ms. Meloth to Mr. Cotty dated November 12, 2008
with the subject line “4Q forecast,” and refers to this e-mail for a true and complete
statement of its contents.
admits that on November 12, 2008, Mr. Price requested legal advice from Mr.
Mayopoulos regarding whether any disclosure of Merrill Lynch’s fourth quarter
performance was necessary and that Mr. Price and other Bank of America employees and
counsel, including Mr. Mayopoulos and Ms. Brenner, subsequently conferred regarding
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any disclosure obligation of Bank of America relating to this information, and refers to
the entirety of Mr. Mayopoulos’s testimony for a true and complete understanding of its
substance.
refers to the entirety of Mr. Mayopoulos’s testimony for a true and complete
understanding of its substance.
admits that Mr. Mayopoulos consulted with external counsel, and refers to the entirety of
the testimony of Messrs. Mayopoulos and Roth for a true and complete understanding of
its substance.
admits that Bank of America obtained disclosure advice from external counsel at
Wachtell, Lipton, Rosen & Katz and that Mr. Roth handled shareholder litigation by
Merrill Lynch shareholders challenging the Merger, states that it lacks knowledge and
information sufficient to form a belief as to the truth of any allegations concerning
communications that are solely internal to Wachtell, Lipton, Rosen & Katz, and refers to
Mr. Roth’s notes and the e-mail dated November 13, 2008 for a true and complete
statement of their contents.
Wachtell, Lipton, Rosen & Katz, states that it lacks knowledge and information sufficient
to form a belief as to the truth of any allegations concerning communications that are
15
solely internal to Wachtell, Lipton, Rosen & Katz, and refers to Mr. Roth’s notes for a
true and complete statement of their contents.
Wachtell, Lipton, Rosen & Katz, states that it lacks knowledge and information sufficient
to form a belief as to the truth of any allegations concerning communications that are
solely internal to Wachtell, Lipton, Rosen & Katz, and refers to the entirety of Mr. Roth’s
testimony for a true and complete understanding of its substance.
admits that Mr. Mayopoulos participated in a telephone conference on November 13,
2008 with Ms. Brenner and Messrs. Roth, Demmo, and Herlihy, and refers to the entirety
of Mr. Mayopoulos’s testimony for a true and complete understanding of its substance.
2008 with Ms. Brenner and Messrs. Roth, Demmo, and Herlihy, and refers to the entirety
of Mr. Herlihy’s testimony for a true and complete understanding of its substance.
2008 with Ms. Brenner and Messrs. Roth, Demmo, and Herlihy and that Mr. Roth took
notes in the course of the telephone conference, and refers to Mr. Roth’s notes for a true
and complete statement of their contents.
admits that Mr. Price attended a meeting on or about November 14, 2008 that was also
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attended by certain employees of Merrill Lynch, among others, concerning Merrill
Lynch’s preliminary, estimated, and forecasted financial performance in the fourth
quarter of 2008 and conferred with Mr. Thain concerning whether Merrill Lynch believed
it appropriate to make an intra-quarter disclosure during the fourth quarter, and refers to
Mr. Roth’s notes of the November 13, 2008 telephone conference for a true and complete
statement of their contents and to the entirety of Mr. Price’s testimony for a true and
complete understanding of its substance.
admits that Mr. Price conferred with Mr. Thain concerning whether Merrill Lynch
believed it appropriate to make an intra-quarter disclosure during the fourth quarter, and
refers to the entirety of Mr. Hayward’s testimony for a true and complete understanding
of its substance.
admits that following the November 13, 2008 conversation, Mr. Mayopoulos, among
others, conducted an analysis of the disclosure-related issues raised by Bank of America,
and refers to the entirety of Mr. Mayopoulos’s testimony for a true and complete
to the entirety of Mr. Mayopoulos’s testimony for a true and complete understanding of
its substance.
admits that Mr. Belk sent Messrs. Price, Curl, and Mayopoulos an e-mail dated
November 19, 2008 with the subject line “FW: Re: Analysis,” and refers to the e-mail
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and the attachment thereto for a true and complete statement of their contents and to the
entirety of the testimony of Messrs. Price and Mayopoulos for a true and complete
admits that on November 18, 2008, certain employees of Bank of America consulted with
counsel, including General Counsel Timothy Mayopoulos, concerning any disclosure
obligation of Bank of America concerning Merrill Lynch’s preliminary, estimated, and
forecasted financial performance in the fourth quarter of 2008, and refers to the entirety
of Mr. Mayopoulos’s testimony for a true and complete understanding of its substance.
admits that Mr. Mayopoulos took notes during a November 18, 2008 meeting with Mr.
Price, among others, and refers to the notes of any such consultation for a true and
complete statement of their contents.
admits Mr. Mayopoulos and Mr. Herlihy spoke by telephone on November 18, 2008 and
that Mr. Curl provided testimony before the Office of the Attorney General of the State of
New York (the “NYAG”) on several occasions, and refers to the entirety of Mr. Curl’s
to the entirety of Mr. Herlihy’s testimony for a true and complete understanding of its
substance.
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to the entirety of Mr. Roth’s testimony for a true and complete understanding of its
substance.
admits that on November 20, 2008, Messrs. Price and Mayopoulos met in person, with
Messrs. Herlihy and Demmo attending by phone, and refers to the entirety of the
testimony of Messrs. Mayopoulos and Price for a true and complete understanding of its
substance.
Bank of America denies the allegations in footnote 2 to paragraph 94.
to the entirety of Mr. Herlihy’s testimony for a true and complete understanding of its
substance.
admits that on or about November 21, 2009, Mr. Price conferred with Mr. Thain
concerning whether Merrill Lynch believed it appropriate to make an intra-quarter
disclosure during the fourth quarter, and refers to the entirety of Mr. Price’s testimony for
a true and complete understanding of its substance.
admits that on November 13, 2008, Mr. Price had a meeting with Messrs. Cotty,
Hayward, Carlin, and Moser, among others, during which a number of topics were
discussed and during which Mr. Moser made a presentation concerning Merrill Lynch’s
goodwill, and avers that Bank of America and Merrill Lynch publicly disclosed, as part
19
of the Proxy Statement and elsewhere, that Merrill Lynch would perform an impairment
test for goodwill in the fourth quarter of 2008, which might result in an impairment to
goodwill; that the determination to write down goodwill was made in connection with the
preparation, review, or audit of financial statements and was not required to be disclosed
until Merrill Lynch made its next periodic report to the SEC; and that Bank of America
and the market generally were aware that as a result of accounting rules, Merrill Lynch’s
historical goodwill would be written off upon the closing of the Merger and that this was
disclosed in the Proxy Statement.
any allegations concerning Deloitte & Touche LLP, a third party, avers that Bank of
America and Merrill Lynch publicly disclosed, as part of the Proxy Statement and
elsewhere, that Merrill Lynch would perform an impairment test for goodwill in the
fourth quarter of 2008, which might result in an impairment to goodwill; that the
determination to write down goodwill was made in connection with the preparation,
review, or audit of financial statements and was not required to be disclosed until Merrill
Lynch made its next periodic report to the SEC; and that Bank of America and the market
generally were aware that as a result of accounting rules, goodwill would be written off
upon the closing of the Merger and that this was disclosed in the Proxy Statement, and
refers to the entirety of Thomas Kaylor’s testimony for a true and complete
100. Bank of America denies the allegations in paragraph 100, states
that it lacks knowledge and information sufficient to form a belief as to the truth of any
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allegations concerning Deloitte & Touche LLP, a third party, and refers to the entirety of
the testimony of Messrs. Moser and Carlin for a true and complete understanding of its
substance.
admits that Mr. Moser sent to Mr. Chai and others an e-mail dated November 20, 2008
with the subject line “goodwill impairment” and that Merrill ultimately concluded that
the goodwill impairment for the fourth quarter would be approximately $2.3 billion, avers
that Bank of America and the market generally were aware that as a result of accounting
rules, Merrill Lynch’s historical goodwill would be written off upon the closing of the
Merger and that this was disclosed in the Proxy Statement, and refers to the e-mail
referenced in paragraph 101 for a true and complete statement of its contents.
admits that Ms. Meloth sent Mr. Moser and Allen Sekler an e-mail dated November 20,
2008 with the subject line “FW: Nov qtd results per request,” and refers to the November
20, 2008 e-mail and the reports referenced in paragraph 102 for a true and complete
sufficient to form a belief as to the truth of any allegations in paragraph 104.
sufficient to form a belief as to the truth of any allegations in paragraph 105, and refers to
the entirety of Mr. Graham’s testimony for a true and complete understanding of its
substance.
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admits that Mr. Moser raised the question of disclosure with Merrill Lynch’s in-house
counsel, and refers to the entirety of Mr. Moser’s testimony for a true and complete
107. Bank of America denies the allegations in paragraph 107, but
admits that Mr. Moser sought legal advice on disclosure from Merrill Lynch in-house
counsel Richard Alsop.
admits that Mr. Mayopoulos testified that he recalls a December 1, 2008 discussion with
Messrs. Price and Curl at which the MAC clause of the Merger Agreement was discussed
and that Mr. Price has a calendar entry reflecting a meeting with Messrs. Curl and
Mayopoulos on December 1, 2008, and refers to the entirety of Mr. Mayopoulos’s
admits that Mr. Mayopoulos testified that he recalls a December 1, 2008 discussion with
Messrs. Price and Curl at which the MAC clause of the Merger Agreement was discussed
and that Mr. Price has a calendar entry reflecting a meeting with Messrs. Curl and
Mayopoulos on December 1, 2008, and refers to the entirety of Mr. Mayopoulos’s
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112. Bank of America denies the allegations in paragraph 112, and
refers to the entirety of Mr. Price’s testimony for a true and complete understanding of its
substance.
refers to the entirety of Mr. Curl’s testimony for a true and complete understanding of its
substance.
admits that Mr. Curl testified before the NYAG on several occasions, and refers to the
entirety of Mr. Curl’s testimony for a true and complete understanding of its substance.
115. Bank of America states that the first sentence of paragraph 115
does not contain any factual allegations to which a response is necessary, and otherwise
denies the allegations in paragraph 115, including the allegations in the first sentence of
paragraph 115 to the extent any response to those allegations is necessary, and refers to
the entirety Mr. Thain’s testimony for a true and complete understanding of its substance.
admits that Mr. Cotty sent an e-mail to Mr. Price on December 1, 2008, with the subject
line “ML Q4 forecast” containing preliminary, estimated, and forecasted financial
information regarding Merrill Lynch’s fourth quarter performance, and refers to this e-
mail for a true and complete statement of its contents.
admits that Messrs. Thain, Lewis, Price, and Cotty met by telephone on or about
December 3, 2008 and that Mr. Chai testified that he recalls preparing Messrs. Thain and
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Cotty for this telephone meeting, and refers to the entirety of Mr. Chai’s testimony for a
true and complete understanding of its substance.
admits that there is an e-mail from Mr. Cotty to Mr. Thain dated December 3, 2008 with
the subject line “Plan and Forecast for today’s call…..I plan on sending to Joe at 2:30”
and that there is an e-mail dated December 3, 2008 from Mr. Cotty to Mr. Price
forwarding this e-mail, and refers to these e-mails for a true and complete statement of
their contents.
admits that on December 3, 2008, Mr. Price received and made handwritten notes on a
report containing certain preliminary, estimated, and forecasted financial information
relating to Merrill Lynch’s financial performance in the fourth quarter of 2008, and refers
to the report referenced in paragraph 119 for a true and complete statement of its
contents.
admits that the participants on the December 3, 2008 conference call discussed certain
preliminary, estimated, and forecasted financial information relating to Merrill’s financial
performance in the fourth quarter of 2008, and refers to the entirety of Mr. Cotty’s
admits that a $3 billion contingency was incorporated into the December 3, 2008 forecast
during the evening of December 3, 2008 following a telephone conference that afternoon
between Messrs. Price and Lewis in Charlotte and Messrs. Thain and Cotty in New York
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and that Mr. Price received and made handwritten notes on a copy of this December 3
forecast.
admits that Mr. Mayopoulos considered the issue of disclosure in November 2008 and
concluded that no disclosure was required and that Mr. Mayopoulos testified on various
occasions before the NYAG and Congress, and refers to the entirety of Mr.
Mayopoulos’s testimony for a true and complete understanding of its substance.
admits that Mr. Mayopoulos testified on various occasions before the NYAG and
Congress, and refers to the entirety of Mr. Mayopoulos’s testimony for a true and
any allegations concerning third parties, and admits that attorneys from Wachtell, Lipton,
25
Rosen & Katz have testified that they were not aware of the December 3, 2008 forecast
prior to the shareholder vote.
admits that Mr. Curl testified on various occasions before the NYAG, and refers to the
admits that Mr. Curl testified on various occasions before the NYAG, and refers to the
admits that both Messrs. Curl and Herlihy testified on various occasions before the
NYAG, and refers to the entirety of their testimony for a true and complete understanding
of its substance.
admits that on the morning of December 4, 2008, Mr. Cotty requested updated
information regarding the estimated results for November and that Mr. Hayward relayed
this request to Ms. Meloth.
admits that Ms. Meloth sent an e-mail to Messrs. Cotty and Hayward and others on
December 4, 2008 at 11:43 a.m. attaching an updated forecast and related documents (the
“December 4 Report”) and that Mr. Cotty forwarded Ms. Meloth’s e-mail to Mr. Price
and others by e-mail on December 4, 2008 at 11:47 a.m., and refers to these e-mails and
the attachments thereto for a true and complete statement of their contents.
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refers to the December 4 Report for a true and complete statement of its contents.
admits that on December 5, 2008, shareholders of Merrill Lynch voted to approve the
Merger and shareholders of Bank of America voted to authorize the issuance of shares
necessary to effect the Merger.
admits that Mr. Carlin sent Mr. Cotty and others an e-mail on December 5, 2008 at 7:59
a.m., avers that that e-mail stated that “mark issues” were “still outstanding,” and refers
to that e-mail for a true and complete statement of its contents and to the entirety of Mr.
Hayward’s testimony for a true and complete understanding of its substance.
admits that Mr. Brown testified before the NYAG, and refers to the entirety of Mr.
Brown’s testimony for a true and complete understanding of its substance.
admits that Mr. Brown testified before the NYAG, and refers to the entirety of Mr.
Brown’s testimony for a true and complete understanding of its substance.
admits that Mr. Price testified before the NYAG on various occasions, and refers to the
entirety of Mr. Price’s testimony for a true and complete understanding of its substance.
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admits that Bank of America referred to the first day of post-Merger operations as “Legal
Day One” and that, following the execution of the Merger Agreement, Bank of America
made efforts to synchronize Merrill Lynch’s closing process with Bank of America’s own
process, and states that it lacks knowledge or information sufficient to form a belief as to
the truth of the allegations regarding Merrill Lynch’s having called such efforts
“Accelerate the Close.”
admits that Bank of America wanted Merrill Lynch to be able to close its books as fast as
Bank of America did, and refers to the entirety of Mr. Cotty’s testimony for a true and
admits that Mr. Carlin sent an e-mail to Mr. Cotty and others on the morning of
December 5, 2008, and refers to that e-mail for a true and complete statement of its
contents.
admits that there was an e-mail exchange between Messrs. Cotty and Hayward on
December 5, 2008, and refers to these e-mails for a true and complete statement of their
contents.
28
admits that there is an e-mail from Ms. Meloth to Audrey Bommer and Mr. Fleming
dated December 6, 2008 at 2:11 p.m., on which Mr. Cotty and others are shown as having
been copied, with the subject line “Re: 2009 Budget – draft expense report” and an e-mail
from Ms. Meloth to Mr. Cotty forwarding this e-mail on December 6, 2008 at 5:12 p.m.,
and refers to these e-mails for a true and complete statement of their contents.
admits that there is an e-mail from Mr. Carlin to Mr. Cotty dated December 7, 2008 with
the subject line “FW: Prelim Nov 08 P&L Reports (as of 12/5),” and refers to this e-mail
for a true and complete statement of its contents.
admits that Bank of America held a meeting of its Board of Directors on December 9,
2008; that members of Mr. Price’s finance team, including Messrs. Cotty, Jeffrey Brown,
and Steve Brown, among others, assisted in the preparation of Mr. Price’s presentation to
the Bank of America Board of Directors; and that Mr. Cotty sent Mr. Thain an e-mail on
December 8, 2008 relating to Mr. Price’s presentation, and refers to this e-mail for a true
and complete statement of its contents.
admits that on December 8, 2008, Merrill Lynch’s MDCC voted to pay Merrill Lynch’s
employees bonuses with an aggregate value of $3.6 billion, and that Mr. Cotty forwarded
to Mr. Hayward an e-mail from Patrick McNeely attaching the Daily Net Revenue Report
12.8.08 (5:15 Flash), and refers to these e-mails and the attachments thereto for a true and
29
admits that the Bank of America Board of Directors met on December 9, 2008, and that
Mr. Price provided summary financial information at the meeting regarding, among other
things, Merrill Lynch’s projected financial performance for the fourth quarter of 2008,
and refers to the minutes of the meeting for a true and complete statement of their
contents.
admits that the Bank of America Board of Directors met on December 9, 2008, and that
Mr. Price provided summary financial information at the meeting regarding, among other
things, Merrill Lynch’s projected financial performance for the fourth quarter of 2008,
and refers to the entirety of Mr. Price’s testimony for a true and complete understanding
of its substance.
admits that the Bank of America Board of Directors met on December 9, 2008, that Mr.
Price provided summary financial information at the meeting regarding, among other
things, Merrill Lynch’s projected financial performance for the fourth quarter of 2008.
refers to the entirety of the Mr. Mayopoulos’s testimony for a true and complete
refers to the entirety of Mr. Mayopoulos’s testimony for a true and complete
30
admits that on December 10, 2008, Mr. Mayopoulos was informed for the first time that
his employment had been terminated, that he was accompanied to the executive parking
garage by an HR executive, and that his personal effects were returned to him at a later
time.
admits that Mr. Moynihan practiced law for many years, including as a partner at a well-
respected law firm; that Mr. Moynihan joined Bank of America in 2004 in connection
with Bank of America’s merger with FleetBoston Financial Corporation; and that Mr.
Moynihan held various leadership positions within Bank of America and was the head of
Global Corporate and Investment Banking shortly before being appointed General
Counsel to replace Mr. Mayopoulos in December 2008.
admits that Mr. Moynihan practiced law for many years, including as a partner at a well-
respected law firm; that Mr. Moynihan joined Bank of America in 2004 in connection
with Bank of America’s merger with FleetBoston Financial Corporation; that Mr.
Moynihan held various leadership positions within Bank of America and was the head of
Global Corporate and Investment Banking shortly before being appointed General
Counsel to replace Mr. Mayopoulos in December 2008; and that Mr. Moynihan’s bar
membership status was inactive at the time he replaced Mr. Mayopoulos.
admits that Mr. Moynihan was named General Counsel on December 10, 2008 and held
31
that position until he was named President of Global Banking and Global Wealth and
Investment Management on January 22, 2009.
admits that Mr. Mayopoulos’s employment was terminated on December 10, 2008, and
refers to the entirety of Mr. Mayopoulos’s Congressional testimony for a true and
admits that Mr. Lewis provided testimony on various occasions before the NYAG, and
refers to the entirety of Mr. Lewis’s testimony for a true and complete understanding of
its substance.
admits Mr. Lewis provided testimony before Congress, and refers to the entirety of Mr.
Lewis’s Congressional testimony for a true and complete understanding of its substance.
admits that Mr. Curl provided testimony on various occasions before the NYAG, and
refers to the entirety of Mr. Curl’s testimony for a true and complete understanding of its
substance.
its substance.
32
its substance.
admits that Ms. Meloth sent an e-mail to Mr. Cotty on December 11, 2008 at 6:17 p.m.
with the subject line “FW: Revenue Daily Pacing,” and refers to that e-mail and the
attachment thereto for a true and complete statement of their contents.
admits that Ms. Meloth sent Messrs. Cotty and Hayward an e-mail dated December 12,
2008 with the subject line “Standard Forecast Report,” which attached a revised forecast
as of the close of business December 10, 2008, and refers to that e-mail and the
attachment thereto for a true and complete statement of their contents.
refers to the entirety of the testimony of Messrs. Cotty and Hayward for a true and
of its substance.
33
of its substance.
admits that Mr. Cotty provided the December 12, 2008 forecast to Mr. Price that
afternoon; that Mr. Price contacted Mr. Curl that afternoon to discuss that forecast; and
that Mr. Curl then requested that Wachtell, Lipton, Rosen & Katz analyze whether or not
Bank of America had grounds to invoke the MAC clause and that Wachtell, Lipton,
Rosen & Katz thereafter conducted such an analysis, and refers to the entirety of Mr.
Curl’s testimony for a true and complete understanding of its substance.
admits that commencing on December 12, 2008 and for several days thereafter,
representatives of Bank of America, including, at certain times, Messrs. Lewis,
Moynihan, Price, and Curl, and representatives of Wachtell, Lipton, Rosen & Katz,
including Messrs. Herlihy, Roth, and Demmo, engaged in conversations concerning
whether or not Bank of America had grounds for invoking the MAC clause of the Merger
Agreement.
any allegations concerning communications that are solely internal to Wachtell, Lipton,
34
Rosen & Katz, admits that Mr. Roth took notes of a conversation with Mr. Demmo on
December 14, 2008 in the course of his representation of Bank of America in connection
with the Merger, and refers to Mr. Roth’s notes for a true and complete statement of their
contents and to the entirety of the testimony of Messrs. Roth and Moynihan for a true and
admits that on December 15, 2008, Messrs. Demmo, Herlihy, and Roth participated in a
telephone conference with Messrs. Price and Curl, states that it lacks knowledge and
information sufficient to form a belief as to the truth of any allegations concerning
communications that are solely internal to Wachtell, Lipton, Rosen & Katz, and refers to
Mr. Roth’s notes for a true and complete statement of their contents.
admits that Wachtell, Lipton, Rosen & Katz drafted talking points for Mr. Lewis and a
legal memorandum discussing the legal principles applicable to MAC disputes, and refers
to the documents referenced in paragraph 184 for a true and complete statement of their
contents.
its substance.
admits that during a telephone conference on December 15, 2008 among Messrs. Price,
Curl, Herlihy, Roth, and Demmo, there was discussion of renegotiating the Merger
35
Agreement and that Mr. Roth took notes during that telephone conference, and refers to
Mr. Roth’s notes for a true and complete statement of their contents.
admits that during a telephone conference on December 17, 2008, management of Bank
of America considered, in consultation with its counsel, whether there may be grounds
for invoking the MAC clause of the Merger Agreement and that Mr. Roth took notes
during that telephone conference, and refers to Mr. Roth’s notes for a true and complete
admits that Mr. Cotty sent Ms. Meloth an e-mail on December 16, 2008 at 8:07 p.m., and
refers to the e-mail referenced in paragraph 190 for a true and complete statement of its
contents.
admits that Mr. Cotty sent Ms. Meloth an e-mail on December 16, 2008, and refers to the
e-mail referenced in paragraph 191 for a true and complete statement of its contents.
admits that Messrs. Lewis, Price, and Moynihan met with Secretary Paulson and
Chairman Bernanke and other federal officials in Washington on the evening of
December 17, 2008 and that during this meeting, the participants discussed Merrill
Lynch’s financial condition and the invocation of the MAC clause.
36
admits that at the December 17, 2008 meeting with federal officials, among other things,
one or more federal officials suggested that Bank of America pause before invoking the
MAC clause in order to allow federal officials to analyze the situation and requested
further information from Bank of America concerning Merrill Lynch’s financial
condition.
admits that during the meeting in Washington on December 17, 2008 and in the days
following the meeting, Bank of America provided financial data concerning Merrill
Lynch’s fourth quarter forecast to Chairman Bernanke, including a report prepared by
Ms. Meloth as of the close of business December 10, 2008, which indicated that Merrill
Lynch was forecasting approximately $18 billion in total fourth quarter pretax losses, and
a document entitled “Merrill Lynch Summary of Legacy Exposure,” and refers to those
documents for a true and complete statement of their contents.
admits that on or about December 18, 2008, Mr. Price advised federal officials that
Merrill Lynch’s fourth quarter forecast as of the close of business December 10, 2008 did
not reflect the impact of several additional items, totaling $3.6 billion, which included an
anticipated goodwill writeoff of $2.3 billion.
admits that on December 18 and 19, 2008, management of Bank of America had further
discussions with federal officials concerning Merrill Lynch’s financial condition and the
37
possibility of Bank of America’s invoking the MAC clause of the Merger Agreement,
and refers to the entirety of Mr. Price’s testimony for a true and complete understanding
of its substance.
admits that during the December 19, 2008 telephone conference with federal officials
including Secretary Paulson and Chairman Bernanke, Mr. Lewis stated that Merrill
Lynch’s fourth quarter losses were now forecasted to reach up to $21.4 billion pretax,
which would include the $2.3 goodwill impairment and other items.
admits that during the telephone conference with federal officials on December 19, 2008,
Mr. Lewis discussed the options being considered by Bank of America, including
invoking the MAC clause, and that the parties discussed the possibility of completing the
transaction with federal financial assistance.
admits that in a telephone conference with federal officials on December 19, 2008, Mr.
Roth discussed Bank of America’s potential grounds for invoking the MAC clause in the
Merger Agreement and that Ms. Brenner wrote an e-mail to Mr. Moynihan about the
conference, and refers to that e-mail for a true and complete statement of its contents.
admits that Mr. Lewis had a telephone conversation with Secretary Paulson on December
21, 2008 and that Mr. Lewis’s talking points for the December 22, 2008 meeting of the
Bank of America Board of Directors reflect aspects of that conversation, and refers to
that document for a true and complete statement of its contents.
38
admits that on or about December 19, 2008, Merrill Lynch informed its employees what
they would receive in VICP for 2008; that Merrill Lynch ultimately paid approximately
$3.6 billion in aggregate value of both cash and stock pursuant to the VICP for 2008; that
149 employees were awarded $3 million or more; that thirty-two employees were
awarded $6 million or more; and that fourteen were awarded $10 million or more.
sufficient to form a belief as to the truth of any allegations in paragraph 203, and
otherwise denies the allegations in paragraph 203.
39
any allegations concerning the Federal Reserve.
sufficient to form a belief as to the truth of any allegations in paragraph 210, except
admits that during a telephone conversation with Mr. Lewis on December 21, 2008,
Secretary Paulson told Mr. Lewis that the Bank of America Board of Directors and senior
management could be removed in the event that Bank of America invoked the MAC
clause of the Merger Agreement.
admits that Mr. Lewis provided testimony before the NYAG on various occasions, and
its substance.
admits that Mr. Lewis provided testimony before the NYAG on various occasions, and
its substance.
admits that Bank of America has a Code of Ethics, and refers to the Code of Ethics for a
40
admits that on December 21, 2008, Mr. Lewis had a telephone conversation with
Chairman Bernanke in which Chairman Bernanke stated, among other things, that the
federal government would negotiate, between the time of the Merger closing and Bank of
America’s earnings announcement in January 2009, the terms of an agreement for federal
assistance in the form of a capital infusion and loss sharing.
admits that Messrs. Lewis and Price testified before the NYAG on various occasions, and
refers to the entirety of their testimony for a true and complete understanding of its
substance.
admits that Mr. Lewis testified before the NYAG on various occasions, and refers to the
entirety of Mr. Lewis’s testimony for a true and complete understanding of its substance.
admits that Mr. Lewis testified before the NYAG on various occasions, refers to the e-
mail written by Mr. Lewis referenced in paragraph 219 for a true and complete statement
of its contents, and refers to the entirety of Mr. Lewis’s testimony for a true and complete
admits that Messrs. Lewis and Price testified before the NYAG on various occasions, and
41
refers to the entirety of their testimony for a true and complete understanding of its
substance.
any allegations concerning Chairman Bernanke’s communications with the Federal
Reserve’s General Counsel.
admits that on January 16, 2009, Bank of America issued a press release reporting, for the
quarter ending December 31, 2008, net losses of $1.79 billion, a diluted loss per common
share of $0.48, $15.31 billion in after-tax losses by Merrill Lynch, and the cutting of
Bank of America’s quarterly dividend to $0.01 per share, and refers to the January 16,
2009 press release for a true and complete statement of its contents.
admits that, as disclosed in Bank of America’s January 16, 2009 press release, Merrill
Lynch reported credit valuation adjustments related to financial guarantor exposures of
$3.22 billion, a goodwill impairment of $2.31 billion, leveraged loan writedowns of
$1.92 billion, $1.16 billion in the U.S. Bank Investment Securities Portfolio writedowns,
and commercial real estate writedowns of $1.13 billion, and refers to the January 16,
2009 press release for a true and complete statement of its contents.
42
admits that Bank of America directors Thomas May and Charles Gifford exchanged
several e-mails during the January 15, 2009 meeting of Bank of America’s Board of
Directors, and refers to those e-mails for a true and complete statement of their contents.
any allegations concerning any third parties, admits that in January 2009, Moody’s and
Fitch downgraded the credit rating of Bank of America and that Bank of America’s stock
price declined at times in January 2009, and refers to the reports in which Moody’s and
Fitch downgraded the credit rating of Bank of America for a true and complete statement
of their contents.
value of both cash and stock in VICP for 2008 and that the cash portion of the VICP was
paid before the year ended.
value of both cash and stock in VICP for 2008, and avers that Bank of America and
Merrill Lynch publicly disclosed, as part of the Proxy Statement and elsewhere, the
amount of overall compensation expense that Merrill Lynch had accrued through the
third quarter of 2008; that numerous media outlets, in newspapers, on television, and over
the internet, reported that Merrill Lynch was expected to pay multi-billions of dollars in
43
year-end incentive compensation for 2008; and that the Proxy Statement expressly
disclosed Merrill Lynch’s intention and/or commitment to pay incentive compensation.
admits that Merrill Lynch paid approximately $3.6 billion in aggregate value of both cash
and stock in VICP for 2008 and that Merrill Lynch paid VICP bonuses (both
discretionary and guaranteed) for 2008 of $3 million or more to 149 employees, thirty-
two of whom received $6 million or more and fourteen of whom received $10 million or
more, and avers that Bank of America and Merrill Lynch publicly disclosed, as part of
the Proxy Statement and elsewhere, the amount of overall compensation expense that
Merrill Lynch had accrued through the third quarter of 2008; that numerous media outlets
in newspapers, on television, and over the internet, reported that Merrill Lynch was
commitment to pay incentive compensation.
232. Bank of America denies the allegations in paragraph 232, avers
that the criteria utilized by Merrill Lynch in determining compensation were fully
disclosed, and refers to the entirety of Mr. Finnegan’s testimony for a true and complete
disclosed, and refers to Merrill Lynch’s March 14, 2008 proxy statement for a true and
complete statement of its contents.
44
disclosed, and refers to Merrill Lynch’s March 14, 2008 proxy statement for a true and
refers to the entirety of Mr. Finnegan’s testimony for a true and complete understanding
of its substance.
admits that on November 11, 2008, Merrill Lynch management presented to the MDCC a
calendar under which it was to review and approve bonus pools on December 8, 2008,
and refers to Mr. Finnegan’s testimony for a true and complete understanding of its
substance.
admits that Mr. Lewis learned from Mr. Alphin that Merrill Lynch intended to pay certain
incentive compensation before the end of the year and that Mr. Lewis delegated
responsibility for discussions with Merrill Lynch relating to compensation to members of
Bank of America’s senior staff, including Mr. Alphin and Ms. Smith.
admits that the Merger Agreement provided that the form and terms and conditions of the
long-term incentive awards granted under the VICP and the allocation thereof among
eligible employees was to be determined by Merrill Lynch in consultation with Bank of
America.
45
admits that Bank of America exercised its right of consultation with respect to the
allocation of VICP awards among eligible employees, and refers to the entirety of Mr.
Thain’s testimony for a true and complete statement of its contents.
value of both cash and stock in VICP for 2008, and refers to the entirety of Mr. Lewis’s
sufficient to form a belief as to the truth of any allegations in paragraph 241, and refers to
the entirety of Mr. Finnegan’s testimony for a true and complete understanding of its
substance.
avers that Bank of America and Merrill Lynch publicly disclosed, as part of the Proxy
that it is Bank of America’s understanding that the MDCC had not yet determined VICP
bonuses for 2008 at the time that Merrill Lynch provided its letters to the New York
46
Attorney General and the United States House Committee on Oversight and Government
Reform, and refers to these letters for a true and complete statement of their contents.
admits that it is Bank of America’s understanding that Merrill Lynch informed its
employees of their 2008 VICP bonuses on or about December 19, 2008.
admits that Mr. Lewis discussed the Merger during a press conference on September 15,
2008, and refers to the cited transcript of that press conference for a true and complete
admits that Mr. Lewis discussed the Merger during a press conference on September 15,
2008, and refers to the cited transcript of that press conference for a true and complete
47
admits that Mr. Lewis discussed due diligence during the September 15, 2008 press
conference, and refers to the cited transcript of that press conference for a true and
admits that Messrs. Lewis and Price discussed due diligence during a conference call for
investors on September 15, 2008, and refers to the cited transcript of that investor
conference call for a true and complete statement of its contents.
admits that Mr. Lewis discussed due diligence during a conference call for investors on
September 15, 2008, and refers to the cited transcript of that investor conference call for a
48
refers to the cited transcript of the September 15, 2008 investor conference call for a true
and complete statement of its contents.
admits that Bank of America conducted a secondary offering on October 7, 2008 in
which it raised approximately $9.76 billion and that Mr. Lewis participated in an earnings
call on October 6, 2008, and refers to the transcript of that call for a true and complete
admits that Messrs. Lewis and Price participated in the October 6, 2008 earnings call, and
refers to the transcript of that call for a true and complete statement of its contents.
admits that on November 3, 2008, Bank of America and Merrill Lynch filed the Proxy
Statement dated October 31, 2008 that sought, among other things, Merrill Lynch
shareholder approval of the Merger and Bank of America shareholder approval of the
issuance of shares of Bank of America common stock necessary to consummate the
merger; that the Proxy Statement contained Merrill Lynch’s unaudited interim earnings
up to June 27, 2008; that the Proxy Statement incorporated by reference various SEC
filings, including Forms 10-Q for the third quarter of 2008; and that Merrill Lynch’s 10-
Q disclosed a pretax loss from continuing operations of approximately $8.251 billion and
a net loss from continuing operations of approximately $5.12 billion during the third
49
quarter of 2008, and refers to the SEC filings cited in paragraph 260 for a true and
admits that on November 4, 2008, Ms. Meloth sent an e-mail to Mr. Cotty, with a copy to
Messrs. Carlin and Hayward, annexing Merrill Lynch’s estimated financial results for
October; that the attachment indicated estimated pretax losses of approximately $6.113
billion; and that on November 5, 2008, Mr. Cotty forwarded Ms. Meloth’s e-mail and the
attachment to Mr. Price, and refers to the November 4, 2008 and November 5, 2008 e-
mails and the attachment thereto for a true and complete statement of their contents.
admits that Merrill Lynch’s fourth quarter 2008 results were timely disclosed in
accordance with applicable law on January 16, 2009, and avers that Bank of America had
no duty to make any disclosure of Merrill Lynch’s results for the fourth quarter of 2008
or any portion thereof at any earlier date.
admits that the Bank of America Board of Directors recommended in the Proxy
Statement that shareholders vote in favor of the issuance of common stock necessary to
effect the Merger, and refers to the Proxy Statement for a true and complete statement of
its contents.
refers to the Proxy Statement for a true and complete statement of its contents.
admits that Bank of America did not make an interim disclosure of financial information
50
for the month of October, and avers that Bank of America had no duty to make such
disclosure.
that Merrill Lynch’s 10-Q for the third quarter of 2008 (which was incorporated by
reference into the Proxy Statement) specifically advised investors that Merrill Lynch
would perform an interim goodwill impairment test in the fourth quarter, which could
result in an impairment charge, and that the Proxy Statement disclosed that all of Merrill
Lynch’s historical goodwill would be written off as a result of the Merger, and refers to
the Proxy Statement for a true and complete statement of its contents.
admits that Merrill Lynch’s 10-Q for the third quarter of 2008 (which was incorporated
by reference into the Proxy Statement) stated that “[a]t September 26, 2008, Merrill
Lynch conducted an annual goodwill test” and “[b]ased on this analysis, Merrill Lynch
determined that there was no impairment of goodwill,” and avers that the 10-Q also
specifically advised investors that “given the continued challenging conditions in the
financial markets and the related impact on the market value of financial institutions,
[Merrill Lynch] will perform an interim impairment test for goodwill in the fourth
quarter, which could result in an impairment charge,” and that the Proxy Statement
disclosed that all of Merrill Lynch’s historical goodwill would be written off as a result of
the Merger, and refers to the Proxy Statement for a true and complete statement of its
contents.
admits that Merrill Lynch’s 10-Q for the third quarter of 2008 (which was incorporated
51
by reference into the Proxy Statement) disclosed that “given the continued challenging
conditions in the financial markets and the related impact on the market value of financial
institutions, we will perform an interim goodwill impairment test in the fourth quarter,
which could result in an impairment charge,” and that the Proxy Statement disclosed that
all of Merrill Lynch’s historical goodwill would be written off as a result of the Merger,
and refers to the Form 10-Q for a true and complete statement of its contents.
admits that the statements in Merrill Lynch’s 10-Q for the third quarter of 2008 regarding
goodwill impairment were not updated, and avers that Bank of America and Merrill
Lynch had no duty to update the statements in Merrill Lynch’s 10-Q for the third quarter
of 2008 regarding goodwill impairment.
admits that the Merger Agreement was appended to the Proxy Statement, avers that Bank
of America and Merrill Lynch publicly disclosed, as part of the Proxy Statement and
elsewhere, the amount of overall compensation expense that Merrill Lynch had accrued
through the third quarter of 2008; that numerous media outlets, in newspapers, on
television, and over the internet, reported that Merrill Lynch was expected to pay multi-
billions of dollars in year-end incentive compensation for 2008; and that the Proxy
Statement expressly disclosed Merrill Lynch’s intention and/or commitment to pay
incentive compensation, and refers to the Proxy Statement and Merger Agreement for a
true and complete statement of their contents.
52
admits that the disclosure schedule referenced in paragraph 271 (the “Disclosure
Schedule”) contains provisions addressing the value of incentive compensation that could
be paid by Merrill Lynch under the VICP and providing certain consultation rights to
Bank of America regarding the terms, conditions, and allocation of long-term incentive
awards, and refers to the Disclosure Schedule for a true and complete statement of its
contents.
53
admits that Bank of America filed supplements to the Proxy Statement on November 21
and 26, 2008, and refers to these supplements for a true and complete statement of their
contents.
admits that Mr. Lewis communicated his support for the Merger at the shareholder
meeting, and refers to the transcript of Mr. Lewis’s remarks at the shareholder meeting
for a true and complete statement of its contents.
277. Bank of America denies the allegations in paragraph 277, but
admits that at the December 5 special meeting of Bank of America shareholders
approximately 82 percent of the votes cast were in favor of the issuance of common stock
necessary to effect the Merger.
278. Bank of America admits the allegations in paragraph 278, and
refers to the text of the December 5, 2008 press release for a true and complete statement
of its contents.
279. Bank of America admits the allegations in paragraph 279, and
refers to the text of the January 1, 2009 press release for a true and complete statement of
its contents.
sufficient to form a belief as to the truth of the allegations in paragraph 281.
54
282. Bank of America repeats and incorporates by reference herein its
responses to paragraphs 1 though 281.
55
refers to the Code of Ethics for a true and complete statement of its contents.
296. Bank of America states that no response is required to the
“Wherefore” clause at page 85 of the Complaint. To the extent any response is
necessary, Bank of America denies the statements in the “Wherefore” clause.
DEFENSES
The statement of any defense below does not assume the burden of proof
for any issues as to which applicable law places the burden on the Attorney General.
1. The Complaint fails to state any claim against Bank of America
upon which relief can be granted.
2. The Complaint fails to state a claim because Bank of America did
not make any statements that were false or misleading.
3. The Complaint fails to state a claim because any alleged
misrepresentations were not material as a matter of law.
56
not omit any material facts necessary in order to make statements of Bank of America
identified in the Complaint not false or misleading.
5. The Complaint fails to state a claim because it fails to satisfy the
pleading requirements of the Civil Practice Law and Rules, including the requirement
that the elements of a cause of action based on misrepresentation be pleaded in detail.
See CPLR 3014; 3016(b).
6. The Complaint fails to state a claim because the Complaint fails to
allege that Bank of America possessed fraudulent intent and, in any event, Bank of
America acted at all times in good faith and without any fraudulent intent.
not intentionally make any misleading statement or misleading omission. The Complaint
fails to plead that Bank of America, or any of its officers, directors, or employees, acted
with scienter.
not negligently make any misleading statement or misleading omission. The Complaint
fails to plead that Bank of America, or any of its officers, directors, or employees, acted
with negligence.
9. The Complaint fails to state a claim to the extent that it alleges
misrepresentations in statements that are not actionable as a matter of law, including but
not limited to statements properly characterized as puffery, statements that are true when
made, and statements as to which there is no duty to correct and/or update.
57
10. The Complaint fails to state a claim because Bank of America was
not required under federal or state law to make interim financial disclosures concerning
Merrill Lynch’s projected or actual fourth quarter losses, the goodwill impairment
analysis conducted by Merrill Lynch during the fourth quarter of 2008, or the
negotiations to obtain federal aid through the Troubled Asset Relief Program.
11. The Complaint fails to state a claim because Bank of America was
not required under federal or state law to disclose the amount or timing of Merrill
Lynch’s VICP bonuses for 2008, or any agreement with Merrill Lynch concerning a cap
on the payment of these bonuses.
12. The Complaint fails to state a claim to the extent it concerns
conduct beyond the territorial reach of either the Martin Act or New York Executive Law
§ 63(12).
13. The Complaint fails to state a claim under New York Executive
Law § 63(12) because, inter alia, it fails to plead repeated fraudulent acts, or persistent
fraud or illegality.
14. The failure to disclose the alleged breach of Bank of America’s
Code of Ethics (asserted in Count Five) is not actionable under either federal law or the
Martin Act and Executive Law. Moreover, the Attorney General lacks standing to pursue
any claims for alleged breaches of Bank of America’s duties under Bank of America’s
Code of Ethics. The Attorney General lacks authority to enforce potential violations of
the disclosure rules contained in the instructions to Form 8-K.
15. The Attorney General’s claims are barred, in whole or in part, by
documentary evidence.
58
16. The Attorney General’s claims are barred, in whole or in part,
because the Attorney General lacks the constitutional or statutory authority to pursue
such claims.
17. The Attorney General’s claims are barred and/or precluded, in
whole or in part, pursuant to the National Securities Markets Improvement Act of 1996,
15 U.S.C. § 77r.
18. The Attorney General’s claims are barred and/or precluded, in
whole or in part, to the extent that they seek to impose upon Bank of America disclosure
obligations that are inconsistent with, or in excess of, those imposed by the federal
securities laws, including but not limited to the Securities Act of 1933, the Securities
Exchange Act of 1934, and the rules and regulations promulgated by the Securities and
Exchange Commission.
19. The Attorney General’s claims are barred, in whole or in part,
because Bank of America acted in accordance with the established custom and usage of
Bank of America’s industry.
20. Any statements uttered by Bank of America that may, in fact,
prove not to be true were said, at the time of their utterance, in good faith and in reliance
upon what the speakers believed was true at the time such statements were uttered.
21. The Attorney General’s claims for damages and restitution are
barred, in whole or in part, because the relief sought can be pursued through private
litigation, including but not limited to (i) the putative class action consolidated as In re
Bank of America Corp. Securities, Derivative, and ERISA Litigation, No. 09 MDL 2058,
pending in the United States District Court in the Southern District of New York, (ii) the
59
derivative action entitled In re Bank of America Corp. Stockholder Derivative Litigation,
C.A. No. 4307-VCS, pending in the Court of Chancery of the State of Delaware, and (iii)
the derivative action entitled Cunniff v. Lewis, No. 09-CVS-3978, pending in the Superior
Court in the State of North Carolina.
22. The Attorney General’s claims for damages and restitution are
barred, in whole or in part, by the stipulation of settlement, and the releases therein,
signed by the parties on June 12, 2009 in County of York Employees Retirement Plan v.
Merrill Lynch & Co. Inc., C.A. No. 4066-VCN, before the Court of Chancery of the State
of Delaware, providing for the settlement of claims in that matter and of the class claims
asserted in In re Merrill Lynch & Co., Inc. Securities, Derivative and ERISA Litigation,
Derivative Action, No. 07-cv-9696, in the United States District Court for the Southern
District of New York.
23. The Attorney General’s claims are barred to the extent they seek to
impose liability retroactively.
24. The Attorney General’s claims to injunctive relief are barred, in
whole or in part, by the existence of an adequate remedy at law.
25. The Attorney General and the shareholders the Attorney General
purports to represent have not sustained any damages compensable at law.
Bank of America reserves the right to assert and pursue additional
defenses, including any that may become known through discovery or otherwise.
60
Dated: New York, New York
August 18, 2010
PAUL, WEISS, RIFKIND, WHARTON &

GARRISON LLP
By: /s/ Daniel J. Kramer

Brad S. Karp (bkarp@paulweiss.com)
Daniel J. Kramer (dkramer@paulweiss.com)
Audra J. Soloway (asoloway@paulweiss.com)
1285 Avenue of the Americas

New York, New York 10019
Tel.: (212) 373-3000
Fax: (212) 757-3990
CLEARY GOTTLIEB STEEN &

HAMILTON LLP
By: /s/ Lewis J. Liman

Lewis J. Liman (lliman@cgsh.com)
Mitchell A. Lowenthal (mlowenthal@cgsh.com)
One Liberty Plaza

New York, New York 10006
Tel.: (212) 225-2550
Fax: (212) 225-3999
Attorneys for Defendant Bank of America

Corporation
61

Bank of America's Response To Cuomo's Fraud Charges

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Bank of America's Response To Cuomo's Fraud Charges

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FILED: NEW YORK COUNTY CLERK 08/18/2010 INDEX NO.

SUPREME COURT OF THE STATE OF NEW YORK

Bank of America Corporation (“Bank of America”), by its undersigned attorneys, files

subheadings, not specifically admitted are hereby denied.

RESPONSES TO ALLEGATIONS OF THE ATTORNEY GENERAL

1. Bank of America contends that paragraph 1 contains no factual

2008 (the “Merger”).

2. Bank of America denies the allegations in paragraph 2, except

for a true and complete statement of its terms.

3. Bank of America denies the allegations in paragraph 3.

4. Bank of America denies the allegations in paragraph 4, except

applicable law on January 16, 2009.

5. Bank of America denies the allegations in paragraph 5.

6. Bank of America denies the allegations in paragraph 6, except

certain employees of Bank of America received certain preliminary, estimated, and

forecasted financial information relating to Merrill Lynch’s financial performance in the

fourth quarter of 2008.

7. Bank of America denies the allegations in paragraph 7, except

financial performance in the fourth quarter of 2008.

9. Bank of America denies the allegations in paragraph 9, except

made by Bank of America and Merrill Lynch was necessary.

10. Bank of America denies the allegations in paragraph 10.

11. Bank of America denies the allegations in paragraph 11, except

12. Bank of America denies the allegations in paragraph 12, except

membership status was inactive as of December 10, 2008.

13. Bank of America denies the allegations in paragraph 13, except

14. Bank of America denies the allegations in paragraph 14.

15. Bank of America denies the allegations in paragraph 15, except

Merrill Lynch in the days following the shareholder vote.

16. Bank of America denies the allegations in paragraph 16.

17. Bank of America denies the allegations in paragraph 17.

18. Bank of America denies the allegations in paragraph 18.

19. Bank of America denies the allegations in paragraph 19.

20. Bank of America denies the allegations in paragraph 20.

21. Bank of America denies the allegations in paragraph 21.

Program in October 2008 and January 2009.

23. Bank of America denies the allegations in paragraph 23, except

closing of the Merger on January 1, 2009.

expected to pay multi-billions of dollars in year-end incentive compensation for 2008;

25. Bank of America denies the allegations in paragraph 25.

26. Paragraph 26 states legal conclusions to which Bank of America

information. To the extent any response to the allegations in paragraph 26 is necessary,

Bank of America denies them.

America denies them.

28. Paragraph 28 states legal conclusions to which Bank of America

America denies them.

29. Paragraph 29 states legal conclusions to which Bank of America

America denies them.

30. Paragraph 30 states legal conclusions to which Bank of America

America denies them.

31. Bank of America denies the allegations in paragraph 31, except

September 2008 and January 2009.

32. Bank of America admits the allegations in paragraph 32.

33. Bank of America denies the allegations in paragraph 33, except

America between September 2008 and January 2009.

34. Bank of America denies the allegations in paragraph 34, except

Lewis during this time period.

between September 2008 and January 2009.

36. Bank of America denies the allegations in paragraph 36, except

2008 and the closing of the Merger.

37. Bank of America denies the allegations in paragraph 37, except

and previously worked in the Finance group.

38. Bank of America denies the allegations in paragraph 38, except