Judge Sets Hearing on BofA-SEC Settlement

A judge has ordered a hearing on a $33 million proposed settlement between the Securities and Exchange Commission and Bank of America Corp. over executive bonuses.

FILE - In this May 7, 2009 file photo, people move past a Bank of America branch is shown in...

FILE - In this May 7, 2009 file photo, people move past a Bank of America branch is shown in downtown Philadelphia, Thursday, May 7, 2009. Bank of America on Monday, Aug. 3, 2009 agreed to pay a $33 million penalty to settle government charges that it misled investors about Merrill Lynch's plans to pay bonuses to its employees. (AP Photo/Matt Rourke, file)

(AP)

Bank of America had agreed earlier this week to pay the penalty to settle government charges that it misled investors about Merrill Lynch's plans to pay bonuses to its executives.

But the settlement is subject to court approval, and Judge Jed S. Rakoff declined to grant it pending a hearing on Monday.

In a statement late Wednesday, Rakoff said the proposed settlement "would leave uncertain the truth of the very serious allegations made in the complaint."

In seeking approval to buy Merrill, Bank of America told investors that Merrill would not pay year-end bonuses without Bank of America's consent. But in its complaint filed with the U.S. District Court for the Southern District of New York, the SEC said Bank of America had already authorized New York-based Merrill to pay up to $5.8 billion in bonuses and didn't share that information with shareholders.

That meant a statement Bank of America mailed to 283,000 shareholders of both companies about the Merrill deal "materially false and misleading," the SEC contends.

Bank of America agreed on Monday to settle the charges without admitting or denying the allegations.

Bank of America, along with Citigroup Inc. and insurance giant American International Group Inc., is among the largest recipients of government aid. It has received $45 billion from the federal $700 billion bank rescue program.

In his statement Wednesday, the judge said the proposed settlement between Bank of America and the SEC "in no way specifies the basis for the $33 million figure or whether any of this money is derived directly or indirectly" from public funds advanced to Bank of America as part of its bail out.

It is not the first time Rakoff has refused to rubber-stamp a major SEC settlement. In 2003, he put the brakes on a proposed $500 million settlement with WorldCom Inc. for massive accounting fraud.