Judge Delays BofA's Settlement with SEC

At a hearing yesterday in New York, a federal judge said he needs more information before he can approve the settlement over bonuses paid to Merrill Lynch & Co. executives at the time of its acquisition by Bank of America (BofA) (see “SEC Charges BofA $33M for Violations Related to Merrill Deal”).

“I am concerned that we have not yet ferreted out all that the court needs to know,” U.S. District Judge Jed Rakoff said, as reported by the Associated Press. Rakoff ordered both sides to provide more information in the next two weeks.

An SEC complaint alleged that BofA did not inform its shareholders of the $5.8 billion in bonuses promised to Merrill Lynch executives. BofA agreed to a settlement without admitting or denying the charges.

Rakoff probed the SEC about its “bare bones complaint” and asked SEC officials who approved the year-end bonuses, according to the AP. “Was this some sort of ghost that performed these actions?” Rakoff asked David Rosenfeld, the associate regional director in the SEC’s New York office. “Or were there human beings who wrote these documents?”

Rakoff also wanted to know how the SEC decided on $33 million (suggesting it might not be enough if what the SEC alleged is true) and whether BofA would pay for it with taxpayer dollars, according to the news report. BofA has received $45 billion in federal aid.

BofA said in a statement that the money would not come out of taxpayer dollars, the AP reported. BofA’s attorney also defended the bonuses a retention tool—which was also met with skepticism by Rakoff: “How many banks were hiring new people at this time?…Or how many brokerage firms, assuming any were left, were hiring at this time?”

Some BofA shareholders were angered over the bonuses and have tried to oust BofA CEO Kenneth Lewis (see “Some BofA Shareholders Want Lewis Out”).