SEC to pursue case against Bank of America
WASHINGTON - The Securities and Exchange Commission said yesterday that it will go to trial against Bank of America Corp. over bonuses at Merrill Lynch, opening the possibility of also bringing charges against bank executives, a week after a judge’s stinging rejection of a $33 million settlement of the case.
The SEC said it will “vigorously pursue’’ its case against Bank of America, which acquired Merrill in a hastily arranged deal a year ago. The agency had accused the bank, one of the biggest US financial institutions, of failing to disclose to shareholders that it had authorized Merrill to pay up to $5.8 billion in bonuses.
The SEC has been weighing its options since US District Judge Jed Rakoff called the proposed settlement a breach of “justice and morality’’ and ordered the case to trial. Another route would have been to try to renegotiate the accord with Bank of America.
“We firmly believe that the settlement we submitted to the court was reasonable, appropriate and in the public interest,’’ the SEC said in a statement issued yesterday. The agency had made that argument in briefs filed in recent weeks to Rakoff.
Bank of America also had defended the settlement as appropriate.
Rakoff had questioned why individual executives at Charlotte, N.C.-based Bank of America were not charged by the SEC. His unprecedented rejection of the settlement put the SEC in a touchy legal situation.
The agency notified the federal court in Manhattan yesterday, where Rakoff issued his ruling a week earlier, that it had decided to proceed to trial in the case.
The SEC said it could seek to bring additional charges if supported by the record of evidence that develops in the trial, meaning that it could seek to charge individual executives.
Bank of America spokesman Scott Silvestri had no immediate comment.
Also yesterday, Bank of America reached an agreement to pay the United States $425 million to exit a costly arrangement whereby the government would have shouldered losses on risky assets from the bank’s takeover of Merrill Lynch.
The fee, which comes after weeks of haggling, will be paid to the Treasury Department, the Federal Reserve, and the Federal Deposit Insurance Corp.
The arrangement was never used, but the government has argued that the bank benefited from the promise of protection.