Lewis still faces legal, political woes

There is no easy exit for Kenneth Lewis.

The swarm of legal and political troubles that prompted him to resign from his post atop Bank of America on Wednesday are likely to follow him long after he leaves. Indeed, new ones are already on the way.

New York state Attorney General Andrew Cuomo is expected to charge Lewis with civil fraud as early as next week for allegedly failing to disclose crucial information about the bank's merger with Merrill Lynch to shareholders, according to a person familiar with Cuomo's plans.

Cuomo has been examining why details of Merrill's bonuses, losses, write-downs, and the consideration that Bank of America executives gave to canceling the merger at the last minute, were not revealed.

The inquiry is one of several federal and state investigations that are set to intensify in coming weeks over the bank's purchase of Merrill Lynch, and the role that Lewis and other executives played in not disclosing the losses and bonus payouts.

The inquiries led Lewis to a growing recognition that they were becoming an issue for the company, said a person familiar with Lewis' reasoning for retiring.

Bank of America will continue to pay Lewis' legal bills after he retires, said Robert Stickler, a spokesman. Lewis recently hired a lawyer, Mary Jo White of Debevoise & Plimpton in New York, to handle his case. The bank is using a lawyer at another firm, Cleary Gottlieb Steen & Hamilton.

As long as Lewis is chief executive of the bank, he can influence decisions on what information it turns over to investigators. But when he departs, his power dims.

Companies often claim that their legal advice should be kept private. But that privilege applies only to the company that hired the lawyers, not its executives, said Jill E. Fisch, a corporate law professor at the University of Pennsylvania. That means that Lewis would not be able to block lawyers from revealing information if the bank decided to let them open up.

The bank's board has increased its involvement in the investigations in recent meetings, according to two people briefed on the board's thinking.

The directors have studied "what if" prospects around each inquiry into the bank and tried to analyze what to do if other investigations emerge later on. One outcome involves charges filed against an executive of the bank, one of these people said.

Lewis is also a member of the board, and he has been present during those discussions.

On a business tour of Asia in recent weeks, Lewis spent time thinking about his legacy and discussing it with others, said a person familiar with the matter. The Merrill merger, which seemed ideal until it soured, will probably become his final chapter, Lewis acknowledged then, the person said.

Lewis leaves before it is clear whether his bet on Merrill and other deals in recent years were worthwhile. Merrill units have been turning profits, but the political and public fallout may not have been worth it, analysts said. And for the hard-charging bank chief, the image of the Wall Street king who reached too far even while taking bailout money will be hard to erase.

"This man has a major stain on him," said Jeffrey A. Sonnenfeld, a professor at the Yale School of Management. "I've known him for decades, and what was painful is he's actually a decent guy."