Skip to main content

Judge Questions Bank of America-SEC Deal

A federal judge said Monday he has questions about a planned $150 million settlement between Bank of America and the Securities and Exchange Commission.



) -- Judge Jed Rakoff strikes again.

The prickly federal judge expressed skepticism on Monday about the Securities and Exchange Commission's proposed $150 million settlement with

Bank of America

(BAC) - Get Bank of America Corp Report

over its handling of the Merrill Lynch deal.

Rakoff, who earlier knocked down a proposed $33 million settlement as inadequate, pointed out during a Manhattan courtroom hearing that the SEC's findings were "strikingly different" from those of New York Attorney General Andrew Cuomo. The A.G. found reason to

TheStreet Recommends

charge Bank of America and two executives with civil fraud, while the SEC did not find enough evidence to charge individuals or the bank with wrongdoing.

Rakoff didn't outright reject or approve the settlement, though he said he has "questions" about the dollar figure, which would be distributed to shareholders. He said the other component -- with Bank of America promising to improve corporate governance and disclosure policies -- was "quite positive," according to press reports. Rakoff hopes to make a ruling on the settlement by Feb. 19, according to

The Wall Street Journal


The charges stem from decisions made ahead of the B of A-Merrill deal closing on Jan. 1, 2009. Bank of America did not disclose Merrill's escalating losses ahead of a shareholder vote, nor did it disclose that up to $5.8 billion in bonus payments had been approved for the struggling investment firm. To complete the deal, then-CEO Ken Lewis accepted $20 billion in additional federal support.

Cuomo has charged the bank, as well as Lewis, and then-CFO Joe Price, with fraud, claiming that they misled shareholders and the government in order to get the merger approved, and to get more taxpayer money to finance it. The bank, Lewis and Price have denied charges of wrongdoing.

Bank of America stock closed down 3.5% on Monday at $14.48, in a day where the major financial firms were under heavy selling pressure. The stock had started the year strong, rising more 14% at its intra-day high of $17.19 on Jan. 7 before the recent pullback and is now down 4% in 2010.

-- Written by Lauren Tara LaCapra in New York