Money Matters, Simplified.
SEC in the midst of Merrill takeover deal controversy
by Jaspreet Kaur - September 10, 2009 - comments
SEC has defended its decision of the proposed settlement between Merrill and Bank of America
Washington, September 10: Defending its decision of a proposed $33 million settlement with Bank of America over bonuses paid to Merrill Lynch executives just before the bank acquired Merrill last year, the Securities and Exchange Commission (SEC) on Wednesday said that the settlement was “fair” and “reasonable”.
The controversy over payment of bonuses
When Bank of America wanted to buy Merrill Lynch last year, it had informed the investors that Merrill would not pay year-end bonuses without the bank’s permission.
However, the SEC filed a complaint against the bank on August 3 in a federal court in Manhattan, alleging that the Bank of America had already given permission to Merrill to disburse bonuses but it did not inform the shareholders about this.
But then in a federal court filing later, the SEC said that there was not enough evidence to accuse anyone from the bank who was responsible for misinforming shareholders about the $3.6 billion paid in bonuses to Merrill employees.
However, on August 25, Judge Jed S. Rakoff of the US District Court in Manhattan declined to accept the proposed settlement without getting a thorough explanation as to why the SEC did not levy any charges against individuals at the bank.
Earlier the Bank of America, in its legal filing, had said that “there is no evidence that any individual is culpable” and agreed with the SEC so that the battle does not reach the court and mar the bank’s reputation.
Attorney general accuses the bank of covering up important facts
As of now, the Bank of America is in a tight spot as it will be facing potential charges from Andrew M. Cuomo, the New York attorney general, regarding the acquisition of Merrill. Mr. Cuomo’s office has been involved in scrutinizing the various aspects of this case.
David A. Markowitz, the chief of Mr. Cuomo’s Investor Protection Bureau, said that “attorney-client privilege is hindering this office’s ability to make fair and fully informed decisions as to what charges, if any, to bring and whether individual Bank of America officers should be charged.”
But the lawyers from the bank starkly declined the accusation that they are trying to hide important facts.
After getting the letter from attorney general’s office, the bank’s lawyers, Lewis J. Liman of Cleary, Gottlieb, Steen & Hamilton, wrote back to Eric O. Corngold, Mr. Cuomo’s executive deputy attorney general for economic justice, that Bank of America was “extremely surprised and disappointed”.
The letter also mentioned that Bank of America had sent several requests to Mr. Cuomo’s office so that they can meet to elaborate on their side of the case but they were rejected every time.
On the other hand, information coming from Mr. Cuomo’s office on Tuesday signalled that they are soon going to make a final judgement on whether they should be filing fraud allegations against Bank of America or any of its executives.
The bank has been given the time to give explanation by Monday.