Bank of America Sued by SEC Over Executive Bonuses

SEC Files Lawsuit Against BofA

At issue here isn’t exactly that Merrill Lynch paid its executives bonuses, but that Bank of America did not reveal this to stock holders. The distinction needs to be made. Earlier this year congress passed legislation banning companies from paying executive bonuses or taxing them 100%. This is in direct contravention of the U.S. Constitution which forbids bills of attainder. They can no more pass such legislation constitutionally, than they can declare black people illegal. Keep this in mind then, this is not about the actual bonus, but more the complete lack of transparency to the stock holders. Furthermore, that legislation was so far reaching as to say that no company could pay bonuses to executives, regardless if the firm ever received federal TARP funds or not. I keep wondering where the supreme court is.

Marshall Front, chairman of Front Barnett Associates investment counseling firm in Chicago, “this is not something that I would worry about as an investor,” Front said. “Ken Lewis should worry about it, but not an investor.”

In a lawsuit filed in Manhattan federal court, the SEC said Bank of America told investors that Merrill Lynch had agreed not to pay year-end performance bonuses or incentive compensation before the Jan. 1, 2009, merger of the firms without Bank of America’s permission.

But, in fact, Bank of America had authorized Merrill Lynch to pay discretionary year-end bonuses, according to the SEC.

Merrill Lynch paid $3.6 billion in bonuses for 2008 despite losing $27.6 billion that year.

“Shareholders were not told about this agreement at the time they voted on the merger,” David Rosenfeld, associate director of the SEC’s New York Regional Office, said in a statement. The SEC said Bank of America misled investors in proxy statements soliciting votes of shareholders on the proposed acquisition of Merrill Lynch.

The agency said the bank had already contractually authorized Merrill to pay up to $5.8 billion in bonuses for 2008.

Members of Congress have expressed outrage over the Bush administration’s involvement in the deal between Bank of America and Merrill Lynch. Some have accused Federal Reserve Chairman Ben Bernanke and former Treasury Secretary Henry Paulson of coercing Lewis to go ahead with acquiring Merrill Lynch despite the investment bank’s deteriorating finances.

The lawsuit was settled for $33 million.

Please visit my legal website: Las Vegas DUI Attorney
See me on YouTube: Shakaama Live

Advertisements

Published by

shakaama

Ex law school student. I was kicked out for revealing I had a heart actually beating inside. I used to be in a modern dance company. I'm working on my 7 miracles to be proclaimed a saint by the pope. #1 is really hard, but once i get over that hump the other 6 will be a cinch.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s