Are we there yet?
The impact of the big bonuses continues to make headlines as last week the Securities and Exchange Commission (SEC) announced simultaneously that it had filed suit and settled with the Bank of America (BofA) for hefty bonuses paid out to Merrill Lynch executives. BofA, which is headquartered in Charlotte, North Carolina, neither admitted nor denied the allegations on settlement.
The claim against BofA arose from the bank's plan to pay some $5.8 billion in bonuses for the fiscal year 2008.
So what's the problem with that? Seems to be business as usual.
The SEC claimed BofA allegedly failed to disclose the bonuses in its proxy statement, which misled investors after the acquisition of the brokerage. Regulators claimed that the bank informed its shareholders that it did not intend to pay year-end bonuses when in fact this was not the case.
The SEC's Director of the division of enforcement, Robert Khuzami, noted that this failure to disclose violated the bank's duties to its shareholders and therefore warranted the significant penalty imposed.
The settlement is subject to court approval and at this point, approval is not forthcoming.
The $33 million penalty which would put the issue to rest with the federal regulators, was not warmly received by Judge Jed Rakoff at the court hearing yesterday. He has ordered more briefing from the parties as he questions the adequacy of the settlement and the lack of transparency about what was known, when and by whom about the bonuses. In heated proceedings yesterday, the Judge voiced anger over the situation and wants to know more from all parties before approving the settlement as it is fashioned now.
Unfortunately for BofA, according to CNNMoney.com, Congress may not be quite so ready to close this issue. The House Committee on Oversight and Government Reform has suggested through ranking member Rep. Darrell Issa, R-Calif., that the SEC matter served as validation of their concerns that had been swirling in an investigation concerning the Merrill acquisition as well.
But wait, there's more.
New York Attorney General Andrew Cuomo also suggested that the BofA / Merrill bonus issue may not be closed for the state either as state securities laws may also have been violated.
Related Web Resources
BofA to pay $33M fine over Merrill bonuses -- SEC charged Bank of America with failing to alert shareholders about bonus payments to Merrill Lynch, bank settles and agrees to pay fine, CNNMoney.com, August 3, 2009
