From the Wall Street Journal:
Federal District Judge Jed S. Rakoff rejected a proposed $33 million settlement of allegations by the Securities and Exchange Commission that Bank of America Corp. "materially lied" in shareholder communications about bonuses to employees of Merrill Lynch & Co.
Instead, Judge Rakoff set a Feb. 1 trial date on the allegations in his New York courtroom.
The SEC and Bank of America had sought the judge's approval of a consent decree to resolve charges that the bank concealed an agreement to pay up to $5.8 billion in bonuses to Merrill executives.
In an order issued Monday, Judge Rakoff acknowledged the public interest in settling disputes rather than having them go to trial. Nonetheless, he wrote, "even upon applying the most deferential standard of review," he was "forced to conclude that the proposed consent judgment is neither fair, nor reasonable, nor adequate" to protect the public interest.
In effect, Judge Rakoff found, the settlement would force the victims of the alleged misstatements--Bank of America shareholders--to pay an additional $33 million.
"It does not comport with the most elementary notions of justice and morality, in that it proposes that the shareholders who were the victims of the bank's alleged misconduct now pay the penalty for that misconduct," the judge wrote.
The judge has noted that SEC policy directs that culpable executives be punished for misleading shareholders, something the commission had not sought in this case.
And, another key quote from Rakoff, who apparently was never been bought off by Wall Street- SEC complex, and the latter will now regret this for a long time:
"The proposed settlement suggests a rather cynical relationship between the parties: the S.E.C. gets to claim that it is exposing wrongdoing on the part of the Bank of America in a high-profile merger; the bank’s management gets to claim that they have been coerced into an onerous settlement by overzealous regulators. And all this is done at the expense, not only of the shareholders, but also of the truth.”
It is now high time for Mary Schaprio and Ken Lewis to tender their resignations.