Bank of America lied to investors when it sought their approval to complete its $50 billion acquisition of Merrill Lynch last year, the Securities and Exchange Commission charged Monday.
In documents sent to shareholders, BofA said Merrill executives would not get year-end bonuses without its consent. In fact, regulators say, the nation's largest bank had "already contractually authorized Merrill to pay up to $5.8 billion in discretionary bonuses to Merrill executives for 2008."
BofA BAC settled the charges without admitting or denying the allegations and paid a penalty of $33 million. "This is an important step forward for Bank of America," the bank said in a statement.
"This is further proof that bank executives will do anything to pay themselves bonuses and stick it to taxpayers, shareholders and workers," says Stephen Lerner, who directs the financial overhaul campaign at union group SEIU, which for months has been calling for the resignation of BofA CEO Kenneth Lewis.
The Merrill bonuses first came to light in January, leading to the ouster of CEO John Thain. On Feb. 10, New York Attorney General Andrew Cuomo revealed that just days before the merger was completed, and despite posting a record $15 billion in losses, Merrill paid out $3.6 billion in bonuses, including $1 million or more each to 700 employees.
"As Merrill was on the brink of bankruptcy ... Bank of America agreed to allow Merrill to pay its executives billions of dollars in bonuses," said David Rosenfeld, associate director of the SEC's New York regional office, in a statement. "Shareholders were not told about this agreement at the time they voted on the merger."
At that time, BofA denied it knew of the bonuses. In a statement, the bank said, "John Thain decided to pay year-end incentives in December as opposed to their normal date in January. BofA was informed of his decision." Lewis told Congress he had "no authority" over the payouts.
Questions surrounding the Merrill acquisition and the bonuses has dogged BofA, especially because the government provided an extra $20 billion so the bank could complete the deal. The bank has yet to pay back $45 billion of taxpayer money.
Cuomo and the House Oversight and Government Reform Committee continue to investigate the deal.
Several large shareholders, including pension fund Calpers, have sued Bank of America for not disclosing the losses before the vote on the Merrill merger.