In an interesting twist to a trial neither the Bank of America (NYSE:BAC) or the Securities and Exchange Commission (SEC) wanted, the SEC has asked U.S. District Judge Jed Rakoff for permission to add new charges against the bank, in addition to the existing charge the bank didn’t disclose billions in bonuses received by executives at Merrill Lynch before voting on whether to acquire the company or not.
With some Bank of America executives (former and current) probably breathing a sigh of relief over the decision by the SEC to not pursue individual charges against any of the bankers, it won’t take away from some fireworks that will evidently start once the trial gets underway on March 1. The SEC has stated in the past that they never found any individual banker from Bank of America attempting to hide any information or mislead shareholders deliberately.
For some reason Judge Rakoff was furious over no individuals being charged when he rejected the settlement of $33 million. His response to the SEC continuing on in that vein hasn’t been revealed yet.
Responding to the motion, Rakoff ruled the SEC would have to file a separate lawsuit concerning the latest civil charges if they wanted to proceed, in place of just placing them on top of the already existing charges concerning the bonuses awarded to Merrill executives.
Bank of America said this in a statement concerning the new charges, that they were “disappointed that more than two months after the court-imposed deadline to amend its complaint and in the absence of any new information, the SEC now at the 11th hour is nevertheless trying to add new charges.”
Much of this case has centered on the executives at Bank of America acting on the advice of their attorneys concerning the Merrill deal. Consequently, the new civil charges imply it was negligent for Bank of America to not disclose the performance of Merrill Lynch, and an error not to do it before the vote.
Recently the judge refused to allow some key witnesses for Bank of America to testify concerning the media coverage of the event, which asserted almost everyone would have known about the bonuses of Merrill Lynch executives. An internal communication did show Bank of America telling people to ignore the media reports, making them look foolish in that regard.
There has been some obvious and legitimate frustration on the part of executives at Bank of America, who did everything they could do concerning legal advice to make the deal work. Add to that the fact that former CEO Ken Lewis wanted to back out of the deal but was pressured by the Federal Reserve and Treasury Department to continue on with it, and it’s really a bizarre lawsuit which in the end, will probably produce no winners.
I hope Bernanke and Geithner are forced to testify to see what their role in this has been. They’ve largely been given a free ride so far concerning the trial and event, and that shouldn’t be allowed to continue.
