Bank of America pays $33 million SEC penalty for misleading investors
BofA pays $33M federal fine over Merrill bonuses
Bank of America pays $33 million SEC penalty for misleading investors about
Merrill bonuses
WASHINGTON (AP) -- Bank of America Corp. has agreed to pay a $33 million
penalty to settle government charges that
it misled investors about Merrill Lynch's plans to pay bonuses to its
executives, regulators said Monday.
In seeking approval to buy Merrill, Bank of America told investors that Merrill
would not pay year-end bonuses
without Bank of America's consent. But the Securities and Exchange Commission
said Bank of America had authorized
New York-based Merrill to pay up to $5.8 billion in bonuses.
That rendered a statement Bank of America mailed to 283,000 shareholders of
both companies about the Merrill deal
"materially false and misleading," the SEC said in a statement.
Bank of America agreed to pay $33 million to settle the charges without
admitting or denying the allegations. The
settlement is subject to court approval.
"Bank of America believes that the settlement ... represents a constructive
conclusion to this issue," company
spokesman Scott Silvestri said in an e-mailed statement.
New York Attorney General Andrew Cuomo, who referred the case to the SEC in
April, said his investigation is
continuing. The SEC said its probe also is ongoing.
Bank of America, along with Citigroup Inc. and insurance giant American
International Group, is among the largest
recipients of government aid. It has received $45 billion from the federal $700
billion bank rescue program.
Charlotte, N.C.-based Bank of America agreed to purchase Merrill in a deal that
was hastily arranged Sept. 13-14,
2008, the same weekend that Lehman Brothers collapsed. Bank of America CEO Ken
Lewis and Merrill Lynch CEO John
Thain announced the deal Sept. 15.
The acquisition came as Lehman's collapse caused panic in the financial markets
and investment banks such as
Merrill faced billions of losses on soured mortgage investments.
Merrill ended up paying $3.6 billion in bonuses in 2008, the SEC said, even
though it lost $27.6 billion that year,
a record for the firm.
Bank of America included a copy of the merger agreement with the proxy
statement that it mailed to shareholders of
both firms in November. That agreement said Merrill would not pay discretionary
bonuses prior to the deal's
closing, the SEC said.
A separate agreement authorizing the bonuses wasn't mailed to shareholders, the
SEC said.
Shareholders in both companies voted to approve the acquisition Dec. 5, which
then closed Jan. 1. The SEC said the
bonuses were paid Dec. 31.
"Companies must give shareholders all material information about corporate
transactions they are asked to approve,"
said Robert Khuzami, director of the SEC's enforcement division. "Failing to
disclose that a struggling company
will pay out billions of dollars in performance bonuses obviously violates that
duty."
The bonuses amount to nearly 12 percent of the $50 billion that Bank of America
paid for Merrill.
Separately, Bank of America announced that Sallie Krawcheck, Citigroup's former
chief executive of global wealth
management, will join the company to run its global wealth and investment
management operations.
Krawcheck, 44, also has served as chief financial officer of Citigroup, as
chairman and CEO of Sanford C. Bernstein
& Co. Inc., and an executive vice president of Bernstein's parent company,
Alliance Capital Management LP.
Shares of Bank of America added 53 cents, or 3.6 percent, to $15.32 Monday. The
company's stock has traded between
$2.53 and $39.50 in the last year
