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August 5, 2009

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BofA settles charges with SEC over misleading investors

By Grant McCool | August 5, 2009, Wednesday | Print Edition

BANK of America Corp has agreed to pay US$33 million to settle charges by the United States Securities and Exchange Commission that it made false and misleading statements to investors about bonuses when it took over Merrill Lynch & Co.

The country's largest bank and the regulator announced the settlement on Monday amid continuing investigations into billions of dollars paid to executives at Wall Street firms in 2008 even as they made huge losses.

The bank neither admitted nor denied the allegations, which were made in a lawsuit filed in Manhattan federal court on Monday. The SEC said its investigation was continuing despite the settlement.

Marshall Front, chairman of Front Barnett Associates, an investment counseling firm in Chicago, said the settlement did not change the bank's outlook but was a concern for its chairman, Kenneth Lewis.

"This is not something that I would worry about as an investor," Front said. "Ken Lewis should worry about it, but not an investor."

The bank said it has hired Citigroup Inc veteran Sallie Krawcheck to head its wealth management operations, making her a potential candidate to succeed Lewis. Lewis has run the bank since 2001. He was stripped of his role as the bank's chairman in April.

Bonuses paid at Merrill and other banks became a hot-button issue last year with a public outcry and several probes, including one by New York Attorney General Andrew Cuomo.

His office said last week that US$33 billion was paid in bonuses at nine banks, including Merrill, that were among the first recipients of US taxpayer money to help them survive.

The SEC lawsuit said Bank of America told investors in proxy documents about the US$50 billion Merrill takeover that Merrill had agreed it would not pay year-end performance bonuses or incentive compensation before January 1, 2009, deal closed.

"In fact, Bank of America had already contractually authorized Merrill to pay up to US$5.8 billion in discretionary bonuses to Merrill executives for 2008," the SEC said.

Merrill paid US$3.6 billion in bonuses for 2008 despite losing US$27.6 billion that year.

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