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SEC charges Bank of America with misleading investors

By Bernard Hibbitts (editor) and University of Pittsburgh School of Law students.

[JURIST] The US Securities and Exchange Commission (SEC) on Monday charged Bank of America with misleading investors regarding billions of dollars paid to Merrill Lynch executives during the acquisition of the firm. The complaint alleges that, during the merger of the companies, the agreement for BOA to allow Merrill Lynch to pay discretionary bonuses was located in a separate document that was not disclosed prior to the shareholders' vote on the merger. The agreement allowed Merrill Lynch to pay up to $5.8 billion of the $50 billion merger consideration as executive bonuses. Ultimately, $3.6 billion in bonuses were paid to Merrill Lynch executives despite record losses in 2008. BOA agreed to settle with the SEC and pay a $33 million penalty but did not admit or deny the allegations. The terms of the settlement enjoin BOA from violating proxy solicitation rules set forth in § 14 of the Securities Exchange Act of 1934. Last week, BOA announced that it reached a settlement with Italian dairy company Parmalat SpA in litigation stemming from the company's 2003 collapse. The settlement agreement dictates that BOA will pay Parmalat $100 million in cash and non-cash components, resolving a 2004 lawsuit brought against the bank. In June, the SEC charged former Countrywide Financial Corporation officials with securities fraud arising from misleading investors about credit risks involved in the company's efforts to build and maintain their market share. Countrywide was acquired by BOA in July 2008, making the bank the nation's leading mortgage originator.

Full post as published by JURIST - The Paper Chase on August 03, 2009 (boomark / email).