U.S. Judge Wants More Data on Bank of America’s Deal With SEC

By Thom Weidlich

Aug. 7 (Bloomberg) -- A federal judge said he needs more information on the basis for Bank of America Corp.’s $33 million settlement of a lawsuit filed by the U.S. Securities and Exchange Commission before he can approve it.

Bank of America on Aug. 3 agreed to resolve claims it misled investors about bonus payments in connection with its January acquisition of Merrill Lynch & Co. The SEC had filed a complaint shortly before the accord was announced.

The agreement didn’t specify how the $33 million figure was arrived at or whether it would come from the $20 billion Bank of America received in bailout money from the federal government, U.S. District Judge Jed Rakoff said in an Aug. 5 order that scheduled an Aug. 10 hearing on the matter.

“Despite the public importance of this case, the proposed consent judgment would leave uncertain the truth of the very serious allegations made in the complaint,” Rakoff wrote.

The SEC claimed in its complaint that Bank of America falsely represented to shareholders of both banks “that Merrill had agreed not to pay year-end bonuses when, in fact, Bank of America had agreed that Merrill could pay such bonuses up to as much as $5.8 billion,” Rakoff wrote. Merrill paid $3.8 billion in bonuses, according to the order.

Bank of America, based in Charlotte, North Carolina, didn’t admit to any wrongdoing in the settlement.

“We look forward to appearing before the judge and answering what questions he may have about the settlement,” Scott Silvestri, a spokesman for Bank of America, said yesterday in a phone interview. “We can’t envision any scenario under which TARP money would be used to fund the settlement,” he said, referring to the federal Troubled Assets Relief Program.

“We look forward to appearing before the court and addressing any questions Judge Rakoff may have,” John Nester, a spokesman for the SEC, said in an e-mailed statement.

The case is Securities and Exchange Commission v. Bank of America Corp., 09-cv-6829, U.S. District Court, Southern District of New York (Manhattan).

To contact the reporter on this story: Thom Weidlich in New York at tweidlich@bloomberg.net.