NEW YORK - The New York Attorney General's Office subpoenaed five members of Bank of America Corp.'s board Wednesday as part of an investigation into its acquisition of troubled investment bank Merrill Lynch & Co., according to a person familiar with the investigation.
The directors are expected to be questioned about what they knew regarding the mounting losses and bonus payments at Merrill before the deal closed Jan. 1, and what role they played in deciding whether to disclose that information to shareholders, said the person, who asked the Associated Press for anonymity because the investigation is ongoing.
New York Attorney General Andrew Cuomo's office is also likely to ask about any threats made by federal regulators to remove board members if the deal wasn't completed, as Bank of America executives have said.
The subpoenas come as Cuomo's office is preparing to file fraud charges in the coming weeks against several high-ranking executives at the Charlotte, N.C., bank over its acquisition of Merrill Lynch.
It wasn't immediately clear which directors received the subpoenas. Some of the subpoenas may have gone to former board members, as nine directors have been replaced this year as the bank overhauled its board.
All 16 directors who were on BofA's board last December are expected to be questioned by the Attorney General's Office eventually, the person said. CEO Ken Lewis, who was chairman at the time, has already testified.
Some of those 16 people include O. Temple Sloan, the bank's former lead director; Walter Massey, who took over as chairman this year; and former Army Gen. Tommy Franks. Sloan and Franks have both since left the board.
Bank of America spokesman Scott Silvestri said the bank will continue to cooperate with Cuomo's office and still maintains that "there is no basis for charges against either the company or individual members of the management team."
Bank of America agreed to acquire Merrill Lynch in a hurried deal about a year ago at the height of the financial crisis, just as Lehman Bros. was about to file for bankruptcy. It was later revealed that Merrill, with the knowledge of Bank of America executives, paid employees $3.6 billion in bonuses shortly before the deal closed at the start of this year.
Bank of America had settled a separate investigation last month into disclosures about the Merrill bonuses with the Securities and Exchange Commission, but a federal judge threw out that $33 million settlement on Monday, saying it "cannot remotely be called fair" and needlessly penalized BofA shareholders. The judge ordered the case to go to trial Feb. 1.
Losses at Merrill forced Bank of America to receive a second round of government bailout money in January after the deal was completed. Bank of America has received $45 billion from the government's Troubled Asset Relief Program, including $20 billion to help absorb Merrill losses.