For the second time, a federal judge has questioned a settlement between regulators and Bank of America (BAC) over the banking giant's 2009 takeover of Merrill Lynch.
In a hearing Monday, U.S. District Judge Jed Rakoff expressed skepticism over the $150 million settlement, which would resolve two lawsuits brought by the U.S. Securities and Exchange Commission against the company. The SEC accused the bank of hiding losses at Merrill as well as failing to disclose to shareholders details of $3.6 billion in bonuses paid out by Merrill in 2008.
Last year, Rakoff nixed a proposed $33 million settlement, saying it did not go far enough in punishing the bank and would unfairly force shareholders to pay the fine.
According to Reuters, Rakoff questioned whether the SEC was too tame in setting forth the facts to help him decide if the latest attempt at a settlement was fair.
The hearing comes just days after New York Attorney General filed fraud charges against the bank, former chief executive Ken Lewis, and Joe Price, who was chief financial officer at the time of the merger and is still employed at the bank in a different position.
Cuomo alleged that Lewis and the bank had failed to disclose to shareholders mounting losses at Merrill Lynch and had used the urgency of the deal to wheedle $20 billion in federal bailout money from the government in exchange for completing the takeover.
Rakoff said the facts as set out by the SEC and those alleged by Cuomo were “strikingly different,” a fact several insiders pointed out Friday when claiming Cuomo was wrong to have pursued his case against the executives.
Rakoff also said he had questions about the departure of former general counsel Timothy Mayopoulos, as well as the role of an outside attorney in advising the bank on what to disclose to shareholders.
As he did before, Rakoff questioned the monetary element of the settlement, but said he was happy with other provisions of the agreement. The deal between the bank and the regulator calls for shareholders to have a say in executive pay and engage an independent auditor to perform assess the effectiveness of the company's disclosure procedures, among other things.
Rakoff must approve the deal before it is official.
