Corporate Governance

Bank of America and Judge Rakoff: A Strategic Profession of Innocence?

By Armin K. Sarabi

We have noted on this Blog the curious decision by BofA to adopt a strategy of complete innocence when attempting to explain the agreement to pay a $33 million penalty.  Its nothing new for a company to think that it has the better of the merits in any case and there is plenty of room to make that case here.  But in justifying the payment of the penalty, it would likewise be common to acknowledge litigation risk as one reason for settling.  Bank of America did not do this.

Perhaps the reason is that the Bank is really looking past the SEC and instead making a statement designed for the Attorney General of New York.  Cuomo's office apparently issued a new round of subpoenas, continuing the investigation into the Bank's knowledge of Merrill's hemorrhaging losses.  Unlike the SEC, he is almost certain to target individuals, at least to the extent he decides to bring any case at all.  While the Bank's profession of innocence helped get the settlement with the SEC thrown out, it also sent a message that the Bank was not culpable and was prepared to fight.  It sounds like a message that BofA would want Cuomo to know. 

Full post as published by The Race to the Bottom on September 19, 2009 (boomark / email).