Federal Coercion: The BofA-Merrill Case

The story of Hank Paulson's and Ben Bernanke's coercion of and threats to BofA CEO Ken Lewis, if he dared tell shareholders of Merrill Lynch's losses, or attempted to scuttle the closing of the Merrill deal, is gaining more credibility with each new article in the media.

My good friend and colleague, B, with whom I had lunch this week, took pity on Lewis for basically being a stooge.

If what I read in Thursday's Wall Street Journal was true, I personally feel that all three people- Paulson, Bernanke, and Lewis- should be prosecuted for the appropriate violations of US law.

Lewis had no backbone. He should have done the right thing for his shareholders, blown the whistle on Bernanke and Paulson, and, if necessary, lost his job in the process. Instead, he cowered in fear and kept silent. He seems to be guilty of a violation of Sarbanes-Oxley, as well as simple violation of his fiduciary responsibility as BofA CEO.

Paulson and Bernanke seem to be guilty of using coercion with Lewis, inducing him to violate his responsibility to his shareholders, and to violate Sarbanes-Oxley. Can they not also be indicted for this?

I'm no fan of needless prosecution of senior government officials without cause. But, in this case, I think what was allegedly done to Lewis, if proven true, deserves harsh punishment for all involved.

If this goes unaddressed, it will be understandable that investors continue to sit on the sidelines, rather than risk their capital in a business environment characterized more by organized crime tactics than the rule of law.