Legal News

Over Before It Starts: SEC, BofA Settle Suit Over Merrill Bonuses

By Ashby Jones

Wow, that was quick. Just as soon as we started seeing CNBC headlines earlier today on the SEC’s suit against Bank of America, the headlines switched, revealing that the parties had settled, with the bank agreeing to pay $33 million to scratch the suit from its to-do list. The lawsuit, filed in Manhattan federal court, alleged that the bank failed to disclose to investors that it had agreed to pay $5 billion in bonuses at the time of its takeover of Merrill Lynch, last fall. Click here for the WSJ story; here for the complaint.

The SEC alleged that Bank of America told investors in proxy documents on the Merrill acquisition that Merrill agreed it would not pay bonuses or other compensation to executives before the takeover deal was closed without Bank of America’s consent. In truth, according to the SEC, Bank of America had already “contractually authorized” Merrill to pay $5.8 billion in bonuses.

Companies are required to disclose any market-moving information to investors. Robert Khuzami, director of the SEC’s Division of Enforcement, said 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.”

The SEC said, however, without elaboration, that its investigation is continuing. One’s also ongoing for the office of New York AG Andrew Cuomo, which referred the pay case to the SEC in February.

Full post as published by Law Blog - WSJ.com on August 03, 2009 (boomark / email).