US charges Bank of America with Merrill "fraud"

The lawsuit states that Bank of America's management- including Lewis (pictured) and Price - "intentionally failed to disclose massive losses" at Merrill to win over shareholders, and then "manipulated" the government into pumping in £12.7billion after "falsely claiming that it would back out of the deal without bailout funds".

Attorney general Cuomo said: "This merger is a classic example of how the actions of our nation's largest financial institutions led to the near-collapse of our financial system.

"Bank of America, through its top management, engaged in a concerted effort to decieve shareholders and American taxpayers at large. This was an arrogant scheme hatched by the bank's top executives who believed they could play by their own set of rules.

"In the end, they committed an enormous fraud and American taxpayers ended up paying billions for Bank of America's misdeeds."

Cuomo said that the bank's top management knew about "disastrous" losses of more than £10.1billion before the shareholder vote on the deal on December 5 2008, but "chose not to disclose this information so that shareholders would approve the merger".

He added that Lewis then told federal regulators that the bank could not complete the merger without "an extraordinary taxpayer bailout due to accelerated losses from Merrill". However, Merrill's losses had reportedly only increased by a further £833million since the shareholder vote.

The lawsuit also states that the bank's management failed to tell shareholders it was allowing Merrill to pay £2.25billion in bonuses, which were "distributed in a manner that was completely inconsistent with Merrill's prior practice, and in the worst year in Merrill's history".

Lewis' attorney Mary Jo White called the lawsuit "badly misguided", and added that there is "simply no basis for any case".