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During several weeks late last year—when some crucial legal decisions affecting not only Bank of America Corp. shareholders but the nation's economic system were being made—the bank fired its general counsel and replaced him with Brian Moynihan, a business executive who hadn't practiced law in years. And he wasn't even actively licensed as a lawyer at the time he was named.

"How were the legal interests of the bank being protected?" asks one source close to a federal investigation into the bank's actions. "The shareholders who are filing suits against the bank [for failing to disclose certain facts] might want to ask that question."

The bank named Moynihan, 49, its general counsel last December 10. That's the same day that chief executive Ken Lewis abruptly fired then-general counsel Tim Mayopoulos.

Since 1999, Moynihan's bio shows, he has been a business-side bank executive and not a legal department employee.

In addition, Moynihan was based in Boston, not Charlotte where the bank's headquarters reside. At the time, his license status was "inactive" with the Massachusetts Board of Bar Overseers. He is not licensed in North Carolina.

Eight days after being named general counsel, Moynihan went back on active status until March of 2009, when he went inactive again, according to Michael Fredrickson, the Massachusetts board's general counsel. The New York Post first reported Moynihan's inactive status on Wednesday.

Bank of America spokesman Lawrence Di Rita says Moynihan "moved quickly after being appointed general counsel to change his status to 'active' with the Massachusetts Bar." Di Rita says the change was "reasonable, timely, and appropriate, and to suggest otherwise is groundless speculation."

Di Rita explains that the change took eight days because Moynihan was "going through a transition to his new assignment after several years of running a business [and] getting up to speed on the issues."

Also See: What Was BofA Lawyer's Advice on Merrill? It Depended on the Audience (from CC)

Also See: Bank of America GC Fired in the Middle of a Controversial Merger ... Why? (from CC)

Moynihan served as the bank's general counsel for only 37 days, but it was a critical time for the company, which was right in the middle of its controversial merger with Merrill Lynch & Co., Inc.

U.S. Rep. Edolphus Towns, D-N.Y, who chairs the House committee investigating the merger, told the Boston Globe that he wants to know more. "In light of all the facts we now know, this is certainly worth a closer look," Towns told the Globe. "What was the rush to fire the old lawyer and replace him with someone who apparently wasn’t even licensed to practice law?"

Towns is asking Moynihan to testify on the bank's actions at a November 17 committee hearing, Reuters news service reported Thursday, citing a source. The hearing is not yet scheduled on the House calendar.

But the panel had canceled an October 22 hearing on the deal where two bank directors, Charles Gifford and Thomas May, were to testify, among others. The directors have been asked to testify at the November hearing, Reuters says. The committee hearings on the merger have been ongoing for months. Under investigation are several issues, including the size and secrecy of Merrill bonuses and the failure to disclose Merrill's spiraling fourth quarter losses to shareholders.

Moynihan did have prior in-house legal experience, but not for years. He joined FleetBoston Financial Corporation in 1993 as deputy general counsel, but in 1999 moved to the business side as executive vice president over Fleet's brokerage and wealth management unit.

He joined Bank of America in 2004 as head of global wealth and investment management, and was named president of global corporate and investment banking in 2007. He served there until he was named general counsel. Five weeks later, on January 16, Moynihan rejoined the business side. He is currently president of the bank's consumer and small business banking.

January 16 was also the day that the federal government announced $20 billion of new bailout funds for the bank. Since then, the merger and the bank's actions have been under investigation by several state and federal agencies.

After serving as general counsel for five years, Mayopoulos had advised bank executives in early December that they did not have a legal basis to invoke an escape clause in the bank's merger agreement with Merrill.

In the words of one lawyer who has talked with Mayopoulos about this advice, the ex-general counsel "wouldn't play ball" with CEO Lewis on the question of the escape clause. Within days of Mayopoulos' advice, Lewis fired him and moved Moynihan in, despite Moynihan's lack of an active license.

Documents in the case show that Moynihan immediately began working with internal lawyers and outside counsel from Wachtell, Lipton, Rosen & Katz to explore how to use the escape clause. What bank execs then decided was to tell federal banking regulators on December 19 that they believed they had legal cause to invoke the clause, records show.

The regulators, and Mayopoulos, told the bank it did not have sufficient legal cause. But if Bank of America went public with its desire to escape, it could have torpedoed the merger. And it probably would have destroyed Merrill, severely damaged the bank itself, and wreaked financial havoc on the U.S. economic system.

So federal officials caved in to the threat and granted the bank the additional bailout funds plus other incentives.

Moynihan was replaced as general counsel by Edward O'Keefe, who had been deputy general counsel under Mayopoulos. Both Mayopoulos and O'Keefe have declined comment.

Moynihan continues to serve as a member of the bank's executive management team, and has been mentioned as a possible successor to Lewis, who is leaving as CEO on December 31. But some shareholders and directors are pushing to choose a new CEO from outside the bank.

Also See: Docs in Bank of America Probe Apparently Show CEO Misled the Feds (from CC)

Also See: SEC Broadens Inquiry Into Bank of America's Merger With Merrill (from CC)

Also See: Did Bank of America CEO Ken Lewis Listen to His Lawyers? (from CC)

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