The Securities and Exchange Commission filed charges August 3 against Bank of America (BofA) for misleading investors about billions of dollars in bonuses that were being paid to Merrill Lynch executives after BofA acquired the brokerage giant.
The SEC says that Bank of America has agreed to settle the SEC's charges and pay a $33 million penalty.
David Rosenfeld, associate director of the SEC's New York Regional Office, said in a statement announcing the charges that, "As Merrill was on the brink of bankruptcy and posting record losses, Bank of America agreed to allow Merrill to pay its executives billions of dollars in bonuses. Shareholders were not told about this agreement at the time they voted on the merger."
The SEC alleges that in proxy materials soliciting the votes of shareholders on the proposed acquisition of Merrill, "Bank of America stated that Merrill had agreed that it would not pay year-end performance bonuses or other discretionary compensation to its executives prior to the closing of the merger without Bank of America's consent." In fact, the SEC says, "Bank of America had already contractually authorized Merrill to pay up to $5.8 billion in discretionary bonuses to Merrill executives for 2008." According to the SEC's complaint, "the disclosures in the proxy statement were rendered materially false and misleading by the existence of the prior undisclosed agreement allowing Merrill to pay billions of dollars in bonuses for 2008."
