NEW YORK (
) -- A Manhattan judge on Tuesday told
Bank of America
Securities and Exchange Commission
to spell out in plain English how they reached a settlement regarding
The bonus brouhaha has been going on for months among BofA, shareholders and regulators, and for weeks with U.S. District Judge Jed Rakoff, ever since the SEC reached a $33 million settlement with the bank. Some shareholders were infuriated that Merrill distributed $3.6 billion in bonuses at the end of last year, just before it was acquired by BofA, despite its escalating losses. The bonuses and losses were not outlined specifically in documents provided to shareholders about the merger.
BofA didn't admit any wrongdoing as part of the settlement or its statements to Judge Rakoff and said Monday that shareholders should have known about the Merrill bonuses because they were
"widely understood." The SEC laid blame for the lack of disclosure at the feet of BofA lawyers, and said it slapped BofA with the $33 million fine because the amount was in line with penalties levied in similar situations in the past. The sum has been called miniscule by critics relative to the alleged wrongdoing, and even the size of the bonus payments.
Judge Rakoff must sign off on the settlement before BofA and the SEC can put the Merrill bonus mêlée behind them. But the judge, who had been harshly critical of the settlement and the lack of transparency surrounding the Merrill deal, wasn't moved by the two parties' explanations.
Before approving the settlement, he asked BofA to explain why it agreed to pay $33 million if the bank did nothing wrong, according to news reports. He also said it is "at war with common sense" for executives to place responsibility for such decisions on lawyers, then invoke attorney-client privilege so that all parties can avoid culpability.
BofA and the SEC must provide clarity in writing by Sept. 9.
-- Written by Lauren Tara LaCapra in New York