Bank of America Corp. and the Securities and
Exchange Commission will need to wait a bit longer to learn the fate of their
$150 million preliminary settlement related to the bank's now infamous takeover
of Merrill Lynch & Co.
U.S. District Judge Jed S. Rakoff told a Manhattan
courtroom this week that he still had questions about the proposal and the amount
of the penalty, and that he wanted further information in order to render his
decision.
Bank of American got $45 billion in public aid
through the Troubled Asset Relief Program, including a second cash infusion
intended to aid in its acquisition of Merrill Lynch.
The SEC claims that Bank of America executives
failed to disclose information to investors regarding Merrill Lynch's
bonuses and the extent of its mounting losses as the two entities approached shareholder votes on the merger in late 2008.
Rakoff has until Feb. 19 to decide whether
to approve the settlement and to begin distributing the proceeds among the investors
who held Bank of America stock at the time of the deal.
Should he decide not to approve the settlement, the
case is slated to go to civil trial on March 1.
The delay and the possible route to trial come as
unwelcome results for both parties.
The SEC clearly wants the entire Bank of America affair to go away, and Rakoff has gone out of his way to scold the agency for acting far too
leniently toward the company and its executives.
Last September, Rakoff refused to sign off on a $33 million settlement between the parties.
Bank of America, which has a new chief executive and has been overhauling the rest of its mangement team, wants out of the same limelight.
The bank hopes to return to some semblance of normalcy as it moves further away from the tenure of former CEO Kenneth Lewis, who stepped down at the end of last year.
Rakoff's opinion that $150 million was probably still inadequate, and that a
$300 million or $600 million settlement was more on target, may still be good news to the bank if it means avoiding further public litigation.
On the same day that Bank of America and the SEC
reached their initial accord (February 4), New York State Attorney General
Andrew Cuomo filed a lawsuit against Bank of America and its former top
executives in New York Supreme Court.
Cuomo's
suit claims that former Lewis and former Chief
Financial Officer Joe Price duped both shareholders and the federal government
in order to complete the takeover of Merrill Lynch.
Cuomo also alleged that Lewis
and Price intentionally hid mounting losses at Merrill Lynch from Bank of
America shareholders so the deal would meet with quick approval. Then, the suit contends, once the merger was approved, Lewis threatened that the bank would walk away unless it got another huge TARP injection of $20 billion.
The New York attorney general's lawsuit, unlike the SEC case, claims this was done with intent rather than negligence.
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