A federal judge today scrapped the $33 million settlement Bank of America and the SEC agreed on as punishment for the bank's not informing shareholders of bonuses paid to Merrill Lynch executives just before the bank bought Merrill, the New York Times reports. Saying BofA "materially lied, " Jed Rakoff noted that the very shareholders who were possibly misled by management would be footing the bill for the settlement.
The settlement “does not comport with the most elementary notions of justice and morality,” wrote Rakoff, who instructed the SEC and BoA to prepare for a trial beginning no later than Feb. 1. Rakoff said the settlement suggests a sweetheart deal between regulator and offender: “The SEC gets to claim that it is exposing wrongdoing on the part of the Bank of America; the bank’s management gets to claim that they have been coerced into an onerous settlement by overzealous regulators. And all this is done at the expense, not only of the shareholders, but also of the truth.”