A bad week Bank of America (BAC) got a lot worse Wednesday after five members of the company's board of directors were subpoenaed by New York State Attorney General Andrew Cuomo as part of an investigation into the bank's acquisition of Merrill Lynch.
Investigators want to know what board members knew about $3.6 billion in bonuses paid to Merrill executives ahead of the merger's completion on Jan. 1, the Associated Press reported, quoting an unnamed source. The news agency said it wasn't clear which five members were subpoenaed.
Cuomo's office will also be looking into mounting losses at the investment bank prior to BofA's purchase and any threats federal regulators may have made if the deal wasn't completed, a charge officials at the Charlotte, N.C.-based bank have made.
The subpoenas come as Cuomo is preparing to file fraud charges in coming weeks against several high-ranking executives at BofA in its acquisition of Merrill. The deal was hastily cobbled together a year ago just as Lehman Brothers was preparing for bankruptcy.
On Monday, a federal court judge rejected an agreement BofA reached with federal officials over the bonus matter and ordered a trial to begin Feb. 1. The decision by a U.S. District Court judge decision voids last month's $33 million deal between the Securities and Exchange Commission and the bank.
Merrill paid the bonuses despite losing a record $27.6 billion last year. Those losses showed up on the balance sheets of BofA, one of the largest recipients of funds from the U.S. government's Troubled Asset Relief Program, or TARP.
Five BofA directors subpoenaed in New York probe