Tags: US | Bank | of | America | Merrill | Lynch

Judge Clears SEC, BofA Settlement on Merrill Deal

Monday, 22 Feb 2010 11:34 AM

A federal judge said Monday he would reluctantly approve an amended $150 million settlement between the Securities and Exchange Commission and Bank of America to end civil charges accusing the bank of misleading shareholders when it acquired Merrill Lynch.

But U.S. District Court Judge Jed S. Rakoff called the revised pact "half-baked justice at best." The dispute had been scheduled for trial next week.

The judge last year rejected a $33 million settlement stemming from the early 2009 acquisition, calling it a breach of "justice and morality."

Rakoff said Monday in his written order approving the revised settlement that it was "considerably improved" but "far from ideal."

He said the new deal's greatest defect "is that it advocates very modest punitive, compensatory and remedial measures that are neither directed at the specific individuals responsible for the nondisclosures nor appear likely to have more than a very modest impact on corporate practices or victim compensation."

He added: "While better than nothing, this is half-baked justice at best."

He said his approval depends on both sides formally ratifying the amended agreement by Thursday.

Calls to the agency and Bank of America for comment were not immediately returned.

The SEC had accused Bank of America of failing to disclose to shareholders before they voted on the Merrill deal that it had authorized Merrill to pay up to $5.8 billion in bonuses to its employees in 2008 even though the investment bank lost $27.6 billion that year.

At a recent hearing, Rakoff had questioned why the SEC's agreement with Bank of America was not as critical as recent charges brought by the New York attorney general's office that were more suggestive of intentional fraud by bank executives.

He said he has since reviewed the underlying facts before the SEC and the inferences the agency had drawn and found them "not to be irrational."

He said he was most troubled by the fact that a penalty package that essentially consists of a $150 million fine "appears paltry."

He said he was also bothered that the fine penalizes the shareholders for what was, "in effect if not in intent, a fraud by management on the shareholders."

The irony, he said, was that it is an acquisition that "may yet turn out well but that could have been a bank-destroying disaster if the U.S. taxpayer had not saved the day."

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A federal judge said Monday he would reluctantly approve an amended $150 million settlement between the Securities and Exchange Commission and Bank of America to end civil charges accusing the bank of misleading shareholders when it acquired Merrill Lynch.But U.S. District...
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2010-34-22
Monday, 22 Feb 2010 11:34 AM
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