Judge Attacks Merrill Pre-Merger Bonuses

Judge Attacks Merrill Pre-Merger Bonuses - 8/11/2009

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HEADLINES \| SETTLEMENTS AND DISMISSALS \| COURT FILINGS LINKS TO OTHER NEWS \| NEWS ARCHIVE	HEADLINES ARCHIVED SETTLEMENTS AND DISMISSALS ARCHIVED

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Judge Attacks Merrill Pre-Merger Bonuses
Louise Story

International Herald Tribune. August 11, 2009
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EXCERPT: Reigniting a major controversy over Wall Street pay, a federal judge on Monday sharply criticized the bonuses that Merrill Lynch hurriedly paid out before it was acquired by Bank of America last year and pointedly questioned a federal settlement that had seemed to put the issue to rest. A week after the Securities and Exchange Commission announced that it had settled the matter, Judge Jed S. Rakoff questioned whether the $33 million agreement with Bank of America was adequate. He refused to approve the deal, saying too many questions remained unanswered, including who knew what and when about the controversial payouts. His ruling prolongs what has become a major embarrassment for Bank of America and its chief executive, Kenneth D. Lewis, and also deals a stinging blow to the S.E.C., which needs Judge Rakoff’s approval of its deal with the bank. Judge Rakoff ordered the bank and the commission to submit more information to him within two weeks. During a hearing in New York that was heated at times, the judge was scathing about the settlement, in which the S.E.C. accused Bank of America of misleading its shareholders. Bank of America neither admitted nor denied wrongdoing. Bank of America and Merrill Lynch, Judge Rakoff said, “effectively lied to their shareholders.” The $3.6 billion in bonuses paid by Merrill as the ailing brokerage giant was taken over by the bank was effectively “from Uncle Sam.” The Merrill bonuses, which were the subject of a state investigation and prompted an outcry in Congress, were paid even though Merrill Lynch lost $27 billion last year. Its deepening red ink later forced Bank of America to seek a second taxpayer-financed bailout “Do Wall Street people expect to be paid large bonuses in years when their company lost $27 billion?” the judge asked.

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