BofA Blames Lawyers For Failure to Disclose Merrill Bonuses

Bank of America Corp. told a federal judge that its own attorneys were responsible for failing to adequately disclose the terms of the bank's purchase last year of Merrill Lynch & Co. But it failed to identify the executives who signed off on their work.

 

The claim was latest attempt to satisfy Judge Jed S. Rakoff of the Southern District of New York that a $33 million settlement reached by the two parties over the merger deal should be approved.

 

The agreement between the SEC and Bank of America was intended to lay to rest charges that the bank failed to disclose to shareholders that it had promised to pay $3.6 billion in bonuses to Merrill Lynch executives after the deal went through.

 

Shareholders eventually approved the purchase, but the deal was criticized almost from the beginning because of the impression that Treasury Department officials played a leading role in brokering it.

 

News that the bank failed to disclose its commitment to pay Merrill Lynch's bonuses contributed to further outrage because the two companies together received $45 billion in bailout money under the Troubled Asset Relief Program.

 

Earlier this month, Judge Rakoff put a hold on the settlement and demanded to know who was responsible for the failure to disclose the bonus payments. He also called into question the value of the settlement, and called the relationship between the $33 million settlement and the size of the overall merger agreement "strangely askew."

 

In the filing yesterday, Bank of America blamed two law firms -- Wachtell, Lipton, Rosen & Katz and Shearman & Sterling - for the error. At the same time, however, the bank produced a 500-page document detailing the extent of information regarding the matter that it believes is subject to the attorney-client privilege.

 

The approach may prove problematic. In recent weeks Judge Rakoff told the parties that any attempt to affix responsibility on the lawyers that worked on the deal would dissolve such a privilege, raising the possibility of a lengthy court fight over the matter, the New York Times reported.

 

In a separate filing, the SEC said it had interviewed the bank's top executives but that none could adequately explain why the company had presented misleading proxy material.