None of the details revealed by Lewis' testimony to Cuomo's office--all substantive matters that would have been of keen importance to shareholders of Merrill Lynch and Bank of America--were ever made public before the deal went through on Dec. 31. That is a shocking violation of the requirement to inform shareholders of any material matters that could impact their vote or holding of shares in either company. This nondisclosure of market sensitive information means all the trading between Dec. 15 and April 22--tens of millions of shares of the largest U.S. bank--was executed on the basis of withheld information. This is a shocking violation of 75 years of securities regulation.
Incredibly, the SEC was never informed of any of this: that Merrill was about to report a huge $15 billion loss, that Lewis wanted to kill the deal, that Paulson told Lewis that Bernanke had instructed him to fire Lewis and dismantle his entire board if he refused to go through with the merger. It's not exactly clear what authority Paulson and Bernanke were going to use to replace Lewis and his board--powers they might assume in a pending systemic breakdown?
"Notably, during Bank of America's important communications with federal banking officials in late December 2008, the lone federal agency charged with protecting investor interests, the Securities and Exchange Commission, appears to have been kept in the dark," states Cuomo's letter to congressional leaders. "Indeed, Secretary Paulson informed this office that he did not keep the SEC chairman in the loop during the discussions and negotiations with Bank of America in December 2008." In other words, Paulson's disdain for SEC Chairman Christopher Cox meant that the Treasury was operating in an autonomous, somewhat high-handed fashion.
BUSTED!!!!!
Lies, Threats, Deal: Paulson, Bernanke, Lewis - Forbes.com
Yes, highly illegal and charges can be brough.