Update | 3:23 p.m. The Securities and Exchange Commission on Monday charged Bank of America with making false statements to investors about its pending acquisition of Merrill Lynch.
Bank of America agreed to settle the S.E.C’s charges without admitting or denying the allegations and will pay a penalty of $33 million.
The lawsuit involves statements Bank of America made in its proxy statement about the Merrill deal, which was announced on Sept. 15. The bank told its investors in the proxy, filed on Nov. 3, that Merrill had agreed not to pay year-end performance bonuses or other incentive pay before closing the deal without Bank of America’s consent.
But, unknown to investors, Bank of America had already agreed that Merrill could pay up to $5.8 billion in year-end compensation to employees, the S.E.C. said in its complaint, which was filed in New York federal court. That agreement was memorialized in a separate bonus schedule that was omitted from the proxy statement, the S.E.C. said.
Merrill had ultimate say over the composition of the bonus pool and who received certain payments, but size of the pool was agreed to by both companies before the merger was announced.
“Companies must give shareholders all material information about corporate transactions they are asked to approve,” said Robert Khuzami, director of the S.E.C’s division of enforcement, in a statement. “Failing to disclose that a struggling company will pay out billions of dollars in performance bonuses obviously violates that duty and warrants the significant financial penalty imposed by today’s settlement.”
Bank of America said in a statement that “the settlement, which it entered into without admitting or denying the S.E.C’s allegations, represents a constructive conclusion to this issue. This is an important step forward for Bank of America and allows us to focus our energies on enhancing stockholder value by continuing to execute our strategies for the long-term success of our business.”
In preparing the proxy statement on the Merrill deal, Bank of America used lawyers at Wachtell, Lipton Rosen & Katz and Cravath, Swaine & Moore represented Merrill Lynch.
New York Attorney General Andrew M. Cuomo has been investigating the bonuses paid out to Merrill executive before the deal closed on Jan. 1.
“We are pleased to see that the S.E.C. has taken action with respect to the Bank of America-Merrill Lynch bonus matter, which this office referred to the S.E.C. on April 23, 2009,” Mr. Cuomo said in a statement.
“As we outlined in a letter to Congress on February 10, 2009, the timing of the bonuses, as well as the disclosures relating to them, constituted a ’surprising fit of corporate irresponsibility.’ While the S.E.C. has settled their action today, we want to be clear that our investigation of these and other matters pursuant to New York’s Martin Act will continue.”
“Apparently corporate crime in America pays, and for those who approved and received bonuses it pays handsomely,” said Dennis J. Kucinich, a Congressman from Ohio. “This may not be the last fine that Bank of America pays for how it handled its merger of Merrill Lynch.”
–Zachery Kouwe
From 1 to 25 of 43 Comments
Are you kidding me? A $33 million fine/penalty for handing out $5.8 billion in bonuses?
$33 million is chump change for Bank of America. They should be fined an amount that hurts their income statement… How bout a billion or 2 to start?
— JoePay 33 million for having squandered 5.8 billion. Where do I sign up? I’d love that job. Hell, I would go to minimum security prison for a year or two to take home that kind of money after destroying the retirement savings of millions of people.
— joeIt’s staggering to think that $5.8 billion went to a handful of individuals as compensation, while $33 million is judged to be firm punishment for a corporation caught red-handed lying to investors.
— JWLet me understand. BofA misleads shareholders, pays a fine to SEC, which essentially comes out of shareholders pocket. Wonderful!
— PVAnd what did the lawyers know and when did they know it? My guess is they knew that if the issue came up there would be a penny ante settlement and everyone would move on.
— andrewSo much for full disclosure.
No wonder these ’solutions’ are not fixing the problem. As anybody with half a brain knows, “BofA” didn’t make these decisions. This agency probelm can only be rectified if executives who made the decision pay a personal penalty.
— PVThe $33 million penalty probably came out of our taxpayer pockets as well.
How sweet is that?
We doled out a bonus we never knew was promised, bailed out the scoundrels who doled out the bonus, and then paid the scoundrel’s slap on the wrist penalties that were agreed upon without our approval.
Only in America!
— Mrinal JhangianiThe other piece that is missing from this story is why weren’t criminal complaints filed for the purposeful falsehoods that B of A made in its proxy and statements to shareholdres re the merger with ML and, where did Merrill get the cash to pay those bonuses (70% was cash) prior to closing the deal with B of A? Another questions that should be asked: did Merrill float the checks for cash bonuses as the deal with B of A closed the following day? And of course, how did the SEC arrive at 33MM as fair value for a company that misled its shareholders to a tune in the billions of dollars?
— Steve MorganAnd what is the SEC going to do with the $33million?? Certainly not give to the shareholders who weren’t provided the accurate information. I believe that the fine should be about 25% of the annual profit of the company. Let he government have 5% and 20% should be given to the shareholders provided they are not managers, board members, or executives of BoA or Merrill.
— MarqueOMG, 5.8 billion for 33 million? Where do I sign up! I’m the taxpayer and want the entire 5.8 billion back!!!!
— Curved AnglesAnother slap on the wrists for the crooks as the government helps them put the lock back on the door so we won’t worry how they picked it in the first place.
— michaelPrivate debt to the public.
Public assets to the thieves.
Any big bank will tell ya, tea from taxpayer money bags taste good to the last drop!
Anyone holding B of A stock now is foolish. They keep proving that shareholder value isn’t a top concern.
— Cabbage RonIt’s great to be angry, but with the % of individuals in the U.S. who have accounts with B of A or its subsidiaries, the vast majority of Americans have something to answer for in terms of supporting businesses like B of A with their own money–prior to bail-outs.
Get a clue and place your anger where it belongs–on yourselves for supporting unethical business practices while times were good, then suddenly turning the tables of support when times weren’t so good. Nothing more than simple hypocrisy, ladies and gentlemen.
— LauraOne word: NEGLIGENCE! hope they burn for this - if I had the means I would organize shareholders to sue like crazy. Only problem - it would be real hard to claw back bonuses unless it goes to a federal court.
— mosesHearing of all these big numbers going to people doing business, and the public’s inability to compel them to give back has given me an idea:
Why not make these MBA’s and their employers pay an income tax with their time instead of their money?
You made $100 million? Good, now manage California’s High Speed Rail initiative for five years, or go consult long term on a school district.
These people are used to meeting targets and getting deals done. America makes it safe for them to get so rich. Why not have them help carry the load in a way that doesn’t cost a penny but reaps major benefits down the road?
— rednosedogWill the 33 million be paid off with taxpayer money? I am glad they did not admit guilt. The SEC regulators really need to go to negotiation school. Also if we nationalize all the TARP banks and give the executives G ratings it would eliminate all the bonus nonsense and maybe bring back agreater ROI.
Mike
— mikeNow, let’s be fair. Obama never promised to spread the bankers’ wealth around. He only proposed spreading the plumbers’s wealth around. And after all, the bankers contributed significantly more to his campaign. They deserve a little SOMEthing in return.
— PJso does this mean BOA will raise their credit card rates even more to cover this?
— NellieDid I miss something again? Where exactly does this $33 million go?
— bflaska“Better to give away all the money as bonuses to our crones than to give it to the IRS!,” the lying, thieving, cheating, bankers said amongst themselves.
And why not, the SEC won’t mind; They won’t fine them with anything approaching the slightest bit of pain. The U.S. Govt. realizes that banks run the government…
“Steal a loaf of bread, go to prison. Steal a railroad, go to Congress!”
- Mark Twain
— wsmithDoes anyone know whether any BoA executive actually will have an injunction against them or is it simply the shareholders of BoA that end of up paying for management’s mistake?
— Ayal RosenthalRidiculous - only $33M for doing this??
I would love if nationwide folks showed their disgust by dropping BofA and moving to some other bank (Wells?).
BofA and Merrill: disgusting leadership. And the financial community wonders why the rest of America is disgusted by that profession right now. Here’s a hint to fix it: demand better leadership in YOUR profession, N-O-W.
— John TrimbleJustice served yet again…on a garbage can lid in a back alley.
— williambanzai7There ought to be a clawback of $5.8+$1.6b for a breach in the terms of Treasury loans. Then let BoA share holders sort that appropriate smack out.
— darkrockI am glad to read most of the comments mirrored my disbelief in this. ONLY IN AMERICA- How did the SEC determine 33 million ? I guess that’s what B of A told them was fair punishment for the crime committed, and probably, the largest such fine ever collected. You make this up and nobody would believe you- try to imagine a minority male , teenaged, robbing a bank using only a note and a costume for , say, $200,000. - We really expect that this perp would be let off with a fine of say, $ 1000.? HAHAHAHA
— DL