Legal action has begun against Bank of America and its former bosses, accusing them of duping investors and taxpayers during the takeover of Merrill Lynch.

The defendants are accused of intentionally withholding details of huge losses Merrill was suffering.

New York state officials have filed the action against the bank, former chief executive Kenneth Lewis and former chief financial officer Joseph Price.

Bank of America said the charges were “regrettable” and lacked merit.

“The evidence demonstrates that Bank of America and its executives, including Ken Lewis and Joe Price, at all times acted in good faith and consistent with their legal and fiduciary obligations,” a spokesman said.

He added that US financial watchdog the Securities and Exchange Commission (SEC) had access to the same evidence as New York state officials and had found no basis to bring charges.