Judge Rejects SEC, BofA Settlement Over Merrill Takeover

Judge Rejects SEC, BofA Settlement Over Merrill Takeover - 9-15-2009

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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 Rejects SEC, BofA Settlement Over Merrill Takeover
Mark Hamblett

New York Law Journal. September 15, 2009
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EXCERPT: Southern District of New York Judge Jed S. Rakoff on Monday rejected the proposed $33 million settlement between the Securities and Exchange Commission and Bank of America stemming from the bank's takeover of Merrill Lynch & Co. The SEC had gone after Bank of America for an allegedly false proxy statement because it failed to disclose that the bank had agreed to allow Merrill to pay up to $5.8 billion in employee bonuses in advance of Bank of America's $50 billion December 2008 takeover of Merrill Lynch. The SEC filed suit and announced a settlement on the same day, Aug. 3, 2009, but Judge Rakoff refused to accept the pre-packaged consent order and held an Aug. 10 hearing on the matter. He then asked the parties additional questions about the settlement that troubled him and received subsequent submissions on Aug. 24 and Sept. 9. In rejecting the settlement Monday in a 12-page order in Securities and Exchange Commission v. Bank of America Corp., 09 Civ. 6829, the judge said, "Overall, indeed, the parties' submissions, when carefully read, leave the distinct impression that the proposed Consent Judgment was a contrivance designed to provide the SEC with the façade of enforcement and the management of the Bank with a quick resolution of an embarrassing inquiry -- all at the expense of the sole alleged victims, the shareholders." Rakoff examined closely the settlement, which turned on Bank of America's Nov. 3, 2008, proxy statement to shareholders urging their approval of the bank's $50 billion acquisition of Merrill Lynch. Bank of America, the SEC alleged in its complaint, "represented that Merrill had agreed not to pay year-end performance bonuses or other discretionary incentive compensation to its executives prior to the closing of the merger without the Bank of America's consent" when, in fact, the bank had agreed to the bonus payments.

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