Thursday, August 20, 2009
Danger, Uncle Sam at Work
"Bank of America Corp. [BofA] agreed to pay $33 million to settle a civil lawsuit alleging that it misled shareholders about billions of dollars in bonuses promised to Merrill Lynch & Co. employees when it bought the troubled firm at the height of the financial crisis last year. ... [BofA], the largest US bank in assets, neither admitted nor denied wrongdoing in settling the lawsuit, describing the agreement with the [SEC] as a 'constructive conclusion' to the matter. The case reflects the SEC's heightened effort to speed up cases, as new SEC Chairman Mary Schapiro and new enforcement director Robert Khuzami take a harder line with companies and individuals under investigation. ... The SEC said the documents show Merrill wouldn't pay year-end bonuses before the deal closed without [BofA's] consent. The bank's view is that the proxy didn't state Merrill bonuses would go unpaid and that it was well known that Merrill had been holding money for year-end awards, according to people familair with the bank's thinking on the matter. ... The US ultimately provided an additional $20 billion to push the deal forward, making [BofA] the second lagest recipient of bank bailout funds after Citigroup", my emphasis, Dan Fitzpatrick and Kara Scannell at the WSJ, 4 August 2009, link: http://online.wsj.com/article/SB124931920883302049.html.
I'm with the BofA on this. This is another empty SEC settlement. Uncle Sam gives the BofA $20 billion and the SEC gets $33 million, .165% back. Big deal. That Merrill held the bonus money was public knowledge. I see this settlement as Uncle Sam's continuing intimidation effort at BofA.