Judge Asks Whether Taxpayers Would Fund $33M BofA Settlement with SEC
A federal judge has refused to approve an agreement by Bank of America to pay $33 million to settle allegations by the Securities and Exchange Commission that the bank misled investors about plans to pay bonuses to executives of Merrill Lynch.
Judge Jed Rakoff set a Monday hearing to examine the deal, according to the Associated Press and the Wall Street Journal (sub. req.).
Rakoff issued a statement Wednesday saying the proposed settlement “in no way specifies the basis for the $33 million figure or whether any of this money is derived directly or indirectly from the $20 billion in public funds previously advanced to Bank of America as part of its ‘bailout.’ ” In all, Bank of America has received $45 billion, the stories say.
Kevin O’Connor, a partner at Bracewell & Giuliani who is a former SEC lawyer, told the Wall Street Journal the taxpayer bailout raises questions. “The government is funding the companies, and the companies are paying penalties to the government,” he said. “The question becomes: Whose money is it anyway?”
The $3.6 billion in bonuses paid by Merrill, which lost more than $27 billion last year, amounted to nearly 12 percent of the $50 billion that Bank of America paid for Merrill, AP says.
The SEC contends Bank of America told investors before its purchase of Merrill that bonuses would not be paid without Bank of America’s consent. In reality, the SEC says, Bank of America had agreed Merrill could pay as much as $5.8 billion in bonuses, according to the AP account.
