At the federal courthouse in Manhattan, Judge Jed Rakoff heard how Bank of America Corp. (NYSE:BAC) and the Securities and
Exchange Commission came to settle on a $33 million payment to resolve
a civil lawsuit brought by the regulator against the bank. The SEC
accused the bank of misleading shareholders by not disclosing it
authorized the payment of up to $5.8 billion of bonuses to Merrill
Lynch & Co. employees.
Rakoff once again refused to sign off on the $33 million settlement between the bank and the SEC. Rakoff said he had "continued misgivings" about the settlement and wanted more information about who was responsible for the alleged wrongdoing, the basis for the settlement itself and whether an evidentiary hearing should be held to weigh the facts of the case, AMLaw Litigation Daily reported.
The judge also queried the role of the law firms that drafted the disclosure materials in advance of the Merrill takeover.
Rakoff also focused on the M&A lawyers' role after he asked the SEC lawyers whether Bank of America CEO Kenneth Lewis and Merrill chairman John Thain should be held accountable for what the SEC called a "materially misleading" proxy statement. SEC lawyer Lewis said Thain and Lewis had "relied on the lawyers' advice."
Rakoff then asked the SEC if its lawyers had interviewed BofA and Merrill attorneys about the proxy statement. When the SEC said those lawyers would have asserted attorney-client privilege, Rakoff said, "You didn't even ask them?"
Lawyers for the bank and the SEC will each file papers on the judge's request by Aug. 24 and then have a chance to file response papers by Sept. 9, after which the judge will then determine if another hearing is necessary. - Donna Block
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