Legal News

A Peak At Wachtell Lipton?s Advice in BacMerSaga

By Amir Efrati

We brought you word earlier today about the filings being made in Manhattan federal court related to the proposed settlement between the Securities and Exchange Commission and Bank of America over the bank’s disclosures ahead of its 2008 merger with Merrill Lynch.

Judge Jed Rakoff, who will rule on the proposed settlement on Monday, had requested more information in order to understand why the SEC concluded that no individual had violated securities laws for not making fuller disclosures.

After all, Rakoff noted, New York Attorney General Andrew Cuomo decided to sue BofA’s former chief, Ken Lewis, and its former finance chief.

Fortunately, AmLaw perused the SEC filings and picked out the parts about Wachtell Lipton, BofA’s legal counsel for the merger. The firm, as loyal readers may recall, has been thrust into the spotlight and we knew it would a matter of time before details of the firm’s discussions with the bank would be made public.

According to AmLaw, the filings, which are mostly depositions of former BofA execs, show that Wachtell Lipton partners Edward Herlihy (pictured) and Nicholas Demmo agreed fairly quickly with executives and in-house counsel not to disclose Merrill Lynch’s mounting fourth-quarter 2008 losses as the merger vote approached.

The picture that emerged from the SEC depositions contrasts with the lawsuit filed by Cuomo. The NYAG’s suit “hinted strongly that Wachtell recommended a greater degree of disclosure than BofA wanted, and that BofA eventually ‘marginalized’ the firm as a result,” AmLaw writes.

In the documents released Thursday, Timothy Mayopoulos, BofA’s former general counsel, testified during a deposition that he became concerned about Merrill’s mounting losses in early-to-mid November.

Around that time, Mayopoulos had a detailed phone conversations with Herlihy and Demmo about the disclosure issues, and the three men concluded without any notable disagreement that disclosure of the losses was not necessary, AmLaw writes.

At one point Demmo and Herlihy considered releasing a so-called “trend disclosure,” in which BofA would make a general disclosure about Merrill’s recent performance and what it might bode for the future, according to AmLaw. They ultimately decided against it.

Full post as published by Law Blog - WSJ.com on February 19, 2010 (boomark / email).