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February 9, 2010

  • BofA Under Fire, Pt.1
      Deception is a cruel thing.

    Joseph Price's problems began early last year when Bank of America (BoA) merged with Merrill Lynch. An Atlanta law firm filed a class action lawsuit against the credit card magnet in an Atlanta Federal court on behalf of BoA stockholders. The lawsuit alleged that BofA withheld valuable information from stockholders prior to their approving the credit card company's merger with Merrill Lynch. According to court documents, the stockholders claim that BofA sent proxy statements to stockholders that were "false and misleading" and that the bank did not disclose the "dire financial condition" of Merrill Lynch prior to the merger vote. Furthermore, the suit states that the credit card company did not reveal its request for additional taxpayer funding prior to the vote as well.

    After the lawsuit filing, Bank of America's stock plummeted signaling that stockholders were not pleased with the credit card company's management team. At the time, Kenneth Lewis was the Chief Executive Officer. He has since retired. Lewis came under fire for the Merrill Lynch merger which resulted in a multibillion dollar loss. While the merger contributed to a major portion of the bank's losses, credit card defaults also jetted up. By the end of November 2008, BofA was near ruin. On top of that, stockholders were demanding damages to cover their losses suffered as a result of a bad deal.

    A couple of days after the lawsuit was filed, Lewis saved the day when he purchased 200,000 shares of stock sending stock prices up. However, the bank‘s struggle hasn't ended as credit card losses continued its upward climb and the nation's unemployment rate reached an all time high. The new lawsuit added to their financial woes with increased legal fees and a threat of paying out millions for damages demanded by the suit. As though the Atlanta suit wasn't enough, the House Financial Services Committee was next in line to take a shot at the bank.

    Continued...
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