Americans have heard plenty about
financial fraud in recent years, due largely to federal enforcement of white collar crimes in the
mortgage industry and related sectors. Investigations of financial wrongdoing can lead to
criminal prosecutions as well as lawsuits initiated by shareholders and
other interested parties.
A major shareholder suit recently filed in New York against Bank of America
touches on some legal issues common to fraud lawsuits and federal white
collar prosecutions. The case involves allegations that shareholders were
kept in the dark regarding the full financial implications of Bank of
America's 2008 purchase of Merrill Lynch for $50 billion.
Merrill Lynch, a symbol of Wall Street prosperity for generations, had
claimed losses of more than $8 billion in 2007 due to heavy investments
in high-risk securities backed by subprime residential mortgages. As those
securities plummeted in value when the bottom fell out of the housing
market and foreclosures rose, Bank of America stepped in to save the company
A group of shareholders now allege that Bank of America executives knew
that the purchase would lead to years of severe losses, all the while
sharing more optimistic projections with investors. Shareholders relied
on the less severe estimates when approving the Merrill Lynch purchase,
and Bank of America stock lost half of its value shortly after the sale
Like anyone with fiduciary duties, top level banking executives and others
responsible for large financial companies must disclose relevant facts
to shareholders prior to proxy votes on large acquisitions and other important
issues. The shareholder suit names Bank of America CEO Kenneth Lewis and
members of the board of directors.
In an article based on a review of court documents, a New York Times financial
journalist speculated that the case will revive calls for securities regulators
and federal prosecutors to seek criminal consequences for prominent executives
and hold them accountable for actions that led to or perpetuated the financial crisis.
Complex Criminal Defense of Accused Financial Professionals
No matter what amount is at stake in an allegedly fraudulent financial
transaction, charges of wire fraud, securities fraud or fraud against
the government can have serious implications for corporate officers, directors
and employees such as brokers. People in those roles who feel the heat
of an investigation must be aware of the perils of self-incrimination
before formal charges are even filed. A white collar fraud defense attorney
can help clients fight back against unfounded or overstated suspicions
and assert their statutory and Constitutional protections.