Monday, September 14, 2009
Judge Rakoff (SDNY) rejected the proposed settlement between the SEC and the Bank of America regarding misleading proxy disclosures over Merrill Lynch bonuses and set a Feb. 1 trial date. In his order, he emphasized the unfairness of making the Bank of America shareholders, in essence, pay the $33 million corporate penalty. The SEC did not seek penalties from any individuals, asserting that it could not do so because lawyers for the Bank and Merrill drafted the documents and made the relevant disclosure decisions. To the judge, that made no sense -- in that case, why not seek penalties from the lawyers? The judge goes on to say that the parties' submissions
"leave the distinct impression that the proposed Consent Judgment was a contrivance designed to provide the SEC with the facade of enforcement and the management of the Bank with a quick resolution of an embarrassing inquiry -- all at the expense of the sole alleged victim, the shareholders."