Bank of America’s CEO and Chairman Ken Lewis, in an effort to purchase Merrill Lynch at the cost of $50 billion misled shareholders by not disclosing all the facts pertaining to the merger. CEO and Chairman Ken Lewis could not have known the controversy and ramifications that would follow his deception or neglect. Or, as he stated himself, there was no intent of deception. The ethical issue here is whether or not Ken Lewis intentionally deceived the shareholders of Bank of America in order to acquire Merrill Lynch. Many question the ambitions of CEO Ken Lewis who had already acquired Countrywide Financial after their failure and now he is acquiring Merrill Lynch. It is reported that Lewis’ investment in Countrywide Financial was $2 billion and his takeover of Merrill Lynch was $44 billion. Reports say that over the last five years Mr. Lewis has spent $100 billion on acquisitions. (Bill Taylor) These acquisitions included MBNA, LaSalle Bank, Fleet Boston and U. S. Trust. It appears that Ken Lewis has built himself a nice little empire. The question here is whether Mr. Lewis acted unethical in his acquisition of Merrill Lynch. Did Ken Lewis bite off too much at the expense of others? We would need to look deeper into the circumstances surrounding his acquisition of Merrill Lynch. Merrill Lynch was a failing company and as part of Bank of America’s agreement to save it, the CEO of Merrill Lynch asked for bonuses for himself and other top management persons. At least 700 of Merrill Lynch employees received $1 million. John Thain, Merrill Lynch’s CEO spent more than $1.2 million redecorating his office—including $35,155 on an antique French commode and $1,405 on a waste basket. Shareholders also were infuriated at learning that Thain sought a $10 million bonus for himself, but was turned away by the board. In spite of the red flags that were waving, CEO Ken Lewis purchases Merrill Lynch in January 2009. It is reported that the Bank of America and Merrill Lynch deal was made in a record of 36 – 48 hours. This deal took place on a weekend and everyone wants to know why didn’t Lewis wait until Monday. Strategically, he could have allowed the company to go bankrupt and forced it to sell for far less. But, CEO Ben Lewis coveted this company and was not about to let it get away. He believed that it was a one time offer and he had to seize the opportunity or lose it. The company (Merrill Lynch) had an operating loss of 21.5 billion in fourth quarter of 2008 and required $20 billion cash infusion from the US government bringing the US government total investment to $45 billion. The Bank’s stock price fell 78% from $33.74 on September 12, 2008 (last day of trading before deal was announced) to $7.18 on January 16, 2009 (day Bank’s earnings were released) eliminating $108.2 billion in market capitalization. Stock prices declined further ($3.93 on February 19, 2009) the following month. Did Ken and team perform adequate due diligence on the complex portfolio on Merrill’s balance sheet during the week of September 13, 14, 2008, when the deal was conceived and announced or in the following two months leading up to the shareholder vote on December 5, 2008? The Bank tried to convince its shareholders it performed appropriate analysis and also cited extensive work by J.C. Flowers to evaluate Merrill’s operations and assets. Was it ethical for the Bank to decide not to inform shareholders of the extent of Merrill’s losses before the deal closed, and how much did Lewis know about the deteriorating situation by December 5, 2008. Fixed income markets suffered major dislocations in October and November ahead of the shareholder vote, but Lewis claimed on the January 16 earnings call that the problems only surfaced in mid to late December. In the midst of other giant financial companies failing and the banking industry under stress from home mortgage debt defaulting, foreclosures, loss of jobs, Mr. Lewis comes into an agreement to “save” Merrill Lynch by merging its company with Bank of America. Although, at the time, Bank of America had experienced a $4.01 billion profit, Merrill’s loss was $15.31 billion. What were the tactics used by CEO Ken Lewis to convince shareholders to approve such an acquisition? Aside from withholding pertinent information from them, he presented to them a very large cost-cutting of costs proposal. He predicted that nearly $7 billion in immediate cost cuts could be implemented by 2012. Also, he committed to fast action in making the acquisition “accretive to earnings” by 2010. (Robert Reed) Ken Lewis is seen by some as acting in haste without thought or valid information. Some see it as being over-ambitious. He now has to convince not only his shareholders that he did not know of Merrill Lynch’s disbursements of large bonuses to top executives but also the Securities Exchange Commission (SEC). CEO Ken Lewis’ ethical values as he himself stated are “that bonuses should not be given during a time of decline such as took place in Bank of America 2008 earnings. He stated that he himself did not received any bonus. But, Merrill Lynch accelerated the bonus timetable to pay employees before the announcement of a 9.8 billion loss for the fourth quarter. To say the least, the effect this has had on employees of both companies has been costly. It is said that Bank of America’s goal was to reduce its employee number by 35,000. Employee numbers in London were decreased by 1,900. (). Dow Jones reports that Bank of America and Merrill loan team experienced cuts of at least 40 people. The Bank of America headquarters in Charlotte, NC along experienced 139 layoffs in the Ballantyne area. Maybe it is greed or perhaps it is smart business tactics, but all can say that this one man’s ethical/unethical decisions have drastically affected lives of employees from the top of the ladder to the bottom. Though, Lewis claims his business practices will afford Bank of America to be in a position to grab market share by extending credit while his competitors languish on the sidelines at a time when other financial institutions won’t have enough capital to make a lot of loans.