BacMerSaga Hits Congress; Will Attorney-Client Privilege Hold Up?

[WSJ Law Blog]

Aside from the drama expected to take place this weekend — would Mad Men and 30 Rock clean up at the Emmy’s? (a: pretty much); would the Cowboys reign supreme in their new stadium’s christening? (a: no) — we were also treated to a less predictable weekend storyline: one congressman’s rather aggressive push into the BacMerSaga.

The chairman of the House Committee on Oversight and Government Reform on Friday told Bank of America that it has questions concerning disclosures made surrounding the bank’s purchase of Merrill Lynch. The panel’s chairman, Edolphus Towns (D-NY), told the bank it can’t use the attorney-client privilege when dealing with Congress. Click here for more, from the NYT; here for earlier coverage of BacMerSaga, from the LB.

In a letter on Friday, Towns (pictured) said the bank must divulge when it became aware of the enormous losses at Merrill last year, when it received a commitment from the federal government for a second round of bailout money and what legal advice its management received about whether it had to disclose those developments to the bank’s shareholders. (Legal advice? Yipes! It means that, at least for the moment, the roles of Wachtell, Lipton and Shearman & Sterling will likely stay firmly in the spotlight.)

Towns gave the bank until noon on Monday to provide answers.

“We appreciate and take very seriously the committee’s important oversight role and have nothing but the strongest intent to work with the committee to help it understand these events,” Kenneth D. Lewis, the bank’s chief executive, said in a letter to Towns.

For now, according to the NYT, Bank of America has turned to some high-powered lobbyists. It recently hired the Podesta Group, run by Tony Podesta, a prominent Democratic lobbyist, to contact Towns’s staff.

Bank of America acknowledged that Congress had the authority to disregard attorney-client privilege. That said, the bank’s Washington law firm, WilmerHale, argued that that would set a bad precedent. It’s a sentiment shared, writes the NYT, by the Association of Corporate Counsel, which came to BofA’s defense this month when the New York attorney general Andrew Cuomo asked the bank to give up its claim that its legal advice should remain private. The group issued a statement saying that it would be an “outrageous precedent” for other public companies if the bank had to give up its right to legal privacy.