Just when Bank of America Corp. (BAC) thought its problems with the Merrill Lynch acquisition were behind it, something else pops up.
This time, a federal judge has balked at approving a $33 million settlement between B of A and the Securities & Exchange Commission over allegations that the bank misled investors about Merrill Lynch's plans for executive bonuses before the acquisition.
According to the Associated Press, Judge Jed S. Rakoff declined to approve the settlement and set a hearing for Monday. At issue were statements that Merrill would not pay year-end bonuses without consent of the Charlotte, North Carolina-based bank. In fact, Bank of America never told shareholders it had already approved as much as $5.8 billion in payments.
In his ruling, Rakoff makes a good point that agreement "in no way specifies the basis for the $33 million figure or whether any of this money is derived directly or indirectly" from the $45 billion in bailout funds given to Bank of America by the federal government, the AP said.
"Merrill ended up paying $3.6 billion in bonuses in 2008, the SEC said, even though it lost $27.6 billion that year, a record for the firm," the AP said. "The bonuses amount to nearly 12 percent of the $50 billion that Bank of America paid for Merrill."
Meanwhile, Bank of America has set up a five-person competition to replace Kenneth Lewis as chief executive officer, according to Bloomberg News. Demands for Lewis' ouster grew following the uproar over the Merrill acquisition, the culmination of a $120 billion acquisition spree he undertook after becoming CEO in 2001.
Shareholders eventually removed Lewis as chairman and the Merrill deal led to a congressional investigation.