Judge Rejects SEC-Bank of America Settlement as “Worse than Pointless”

Wednesday, September 16, 2009
Judge Jed Rakoff

Third time was not the charm for Bank of America and the Securities and Exchange Commission (SEC). Twice before, the two parties had tried to convince a federal district judge, Jed Rakoff, to sign off on a $33 million settlement over BofA’s attempt to hide from bank shareholders the payment of billion-dollar bonuses to Merrill Lynch executives, only to be told to come back with more information. Finally, Rakoff ran out of patience on Monday and—in a scathing ruling—ordered the SEC and BofA to prepare for a possible trial next February.

Calling the proposed settlement “worse than pointless,” Rakoff wrote that the deal did “not comport with the most elementary notions of justice and morality.” Experts said the judge appears determined to expose the truth about whether BofA executives lied to shareholders.
“It’s a strong, blistering decision,” John C. Coffee, a Columbia Law School professor who has taught with Rakoff, told The New York Times. “It is really a critique, not just of this case, but of a long-standing practice at the SEC, which effectively allowed corporate managers to buy immunity with their shareholders’ money.”
SEC lawyers disagreed with Rakoff’s decision and were considering their legal options. It is possible they could appeal the case to a higher court or drop the charges altogether, but either scenario seems unlikely, experts say.
-Noel Brinkerhoff
Judge Calls $33M BofA Settlement 'Pointless' (by Annie Youderian, Courthouse News Service)
Judge Rejects Settlement Over Merrill Bonuses (by Zachary Kouwe, New York Times)
Judge Jed Rakoff Ruling (U.S. District Court Southern District of New York) (PDF)


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