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Bank of America rejects SEC claims in bonus suit

Last Updated: Saturday, September 26, 2009 - 12:31

New York: Bank of America Corp formally denied US Securities and Exchange Commission claims accusing it of misleading shareholders about bonuses it let Merrill Lynch & Co pay employees before the companies` January 1 merger, and said it is seeking an order dismissing the regulator`s complaint.

The bank`s response, in a Friday filing, was expected, and came 11 days after US District Judge Jed Rakoff rejected its USD 33 million settlement with the SEC over the USD 3.6 billion of bonus awards.

Rakoff, who is still handling the case, was upset that the accord did not require disclosure of the names of executives and lawyers who vetted the bonuses and the decision not to disclose them, and yet left shareholders on the hook for a fine. He called the settlement a "contrivance" that violates "the most elementary notions of justice and morality."

In its answer to the SEC`s complaint, Bank of America maintained that the proxy statement for the merger did not contain false or misleading statements, or omit key facts. It also said it was not negligent in preparing the proxy statement.

SEC spokesman John Heine said: "As we alleged in our complaint, Bank of America did not provide investors with complete and accurate information about the bonuses to be paid by Merrill Lynch to employees."

"We intend to prove in court that their disclosure failure violated the federal securities laws," said Heine.

Earlier this week, Rakoff agreed to a schedule to bring the case to trial by March 1, 2010, one month later than he earlier had wanted. He called the March 1 date "firm and fixed."

Bank of America, based in Charlotte, North Carolina, faces many lawsuits and investigations by lawmakers and regulators over the Merrill merger, which made it the largest US bank.

New York Attorney General Andrew Cuomo has threatened to sue bank officers, perhaps including Chief Executive Kenneth Lewis. Ohio Attorney General Richard Cordray plans on Monday to update the status of a shareholder class-action lawsuit against the bank.

Bank of America shares dropped 38 cents to $16.60 on the New York Stock Exchange on Friday. They traded at $33.74 before the Merrill purchase was announced on Sept. 15, 2008.

Bureau Report

First Published: Saturday, September 26, 2009 - 12:31

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