A federal judge on Monday, September 14, threw out Bank of America Corp.’s proposed $33 million settlement with the Securities and Exchange Commission over $5.8 billion in bonuses paid by Merrill Lynch in 2008.
The ruling by U.S. District Judge Jed S. Rakoff in New York means that the agency’s suit concerning inadequate disclosure of the bonuses to Bank of America shareholders will lead to a trial in February.
In a 12-page order, Rakoff said Bank of America management, in its proposed acquisition of Merrill Lynch last year, allegedly hid from BofA shareholders “that as much as $5.8 billion of their money would be given as bonuses to the executives of Merrill who had run that company nearly into bankruptcy” and that bank “would not settle the legal consequences of [its] lying by paying the SEC $33 million more of [its] shareholders’ money.”
“This proposal to have the victims of the violation pay an additional penalty for their own victimization was enough to give the court pause,” Rakoff said in the order.
Rakoff directed Bank of America and the SEC to file with the court no later than September 21 “a jointly proposed case management plan that will have this case ready to be tried on February 1, 2010.”
SEC spokesman John Nester said in a statement, “As we said in our court filings, we believe the proposed settlement properly balanced all of the relevant considerations. We will carefully review the court’s most recent order.”
Bank of America spokesman Scott Silvestri couldn’t be reached for comment.