Citing the serious nature of the charges and allegations made by the SEC about bonuses promised to employees of Merrill Lynch last year, Judge Jed S. Rakoff refused to sign off on the $33 million settlement reached by the SEC and Bank of America over the issue.
Now a hearing is scheduled for Monday to bring out into the open how the two sides reached the figure in the agreement.
The judge wrote that “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,” and about the agreement added that it “in no way specifies the basis for the $33 million figure or whether any of this money is derived directly or indirectly from the $20 billion in public funds previously advanced to Bank of America as part of its ‘bailout.'”
Another problem a number of lawyers see is the contradiction in the SEC guidelines which in past instances has been sought against individuals rather than a company. This is a departure from those practices. This is important because if the company is taken to account, shareholders can actually be penalized more than once.
Basically the idea of going after a company, which will respond quickly to avoid negative headlines, is pursued to show the SEC is acting aggressively and swiftly, as new Chairman Mary Schapiro is attempting to do by going after the types of cases which produce headlines to make the Obama administration look good.
This should be a good check and balance to the SEC and the banking industry, while taxpayers rightly get a look at how their money is being spent and the conditions under which these agreements are being made.
Monday should prove a very interesting lesson in how these deals are being made and the motivation behind them.
