SEC Blames Wachtell, Shearman for Keeping Bank Bonuses Secret
The Securities and Exchange Commission is blaming two law firms for Bank of America’s failure to disclose $3.6 billion in executive bonuses it planned to pay to executives at Merrill Lynch.
An SEC brief points the finger at lawyers from Wachtell, Lipton, Rosen & Katz and Shearman & Sterling, according to stories in the American Lawyer and the New York Times.
The brief was filed in response to questions from U.S. District Judge Jed Rakoff, who balked at approving an agreement by Bank of America to pay $33 million to settle SEC allegations that the bank misled investors about plans to pay bonuses when acquiring Merrill.
Wachtell represented Bank of American in the takeover, while Shearman represented Merrill.
The SEC brief says the lawyers decided to include information about the bonus program in a nonpublic “disclosure schedule” that wasn’t mentioned in the merger agreement or proxy statement, the American Lawyer story says. It blames the two law firms and in-house lawyers at Bank of America.
A brief submitted by Bank of America argued that Merrill bonuses weren’t hidden, since its financial statements showed money had been set aside to pay compensation similar to that paid in the prior year. The argument that there was no failure to disclose was supported by affidavits from Dewey & LeBoeuf chairman Morton Pierce and Stanford law professor Joseph Grundfest, the American Lawyer says.
