When people think of former Bank of America CEO Ken Lewis, they will likely first think about his disastrous Countrywide purchase back in 2008, a deal he promoted as one heck of a bargain.

The deal sealed his fate as the man who lead the once mighty bank to the edge of a scary precipice. But winding through the courts now is a massive shareholder suit about another deal--the equally unfortunate Merrill Lynch deal, which was also struck in 2008. That deal got the bank, Lewis, and then CFO indicted by the SEC on civil charges, which was settled for $150 million, paid for by the bank. The Deal Professor suggest that the private case is strong.

"The potential damages could be enormous. Damages in a claim like this are calculated by looking at the amount lost as a result of the securities fraud. A court will most likely calculate this by referencing the amount that Bank of America stock dropped after the loss was announced; this is as much as $50 billion. It is a plaintiffs' lawyers dream."

So you can add this to the legal uncertainty hanging over the bank now. A central figure in the case is the bank's former general counsel, Timothy J. Mayopoulos, who was somewhat oddly fired after he sought a meeting with the CFO about a massive loss that was higher than Mayopoulos expected. The plaintiffs contend he was misled about extent of Merrill's losses, which they feel should have been disclosed. The case is scheduled for trial in October 2012. The bank would be wise to settle this at the appropriate time.

The Professor concludes: "Whatever the outcome of this case, it appears that Bank of America shareholders were sacrificed in December 2008 so that the Merrill deal could be completed. The bill may now be coming due for Bank of America."

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