This morning, Federal Judge Jed Rakoff begrudgingly approved a $150 million settlement between the Bank of America and the Securities & Exchange Commission stemming from the BofA’s merger with Merrill Lynch. Whether BofA’s failure to disclose to its shareholders Merrill’s lavish bonuses and cascading losses was due to negligence or fraud is left unresolved. (The tone of the opinion implies the judge believes the latter is closer to the truth.) Although Rakoff concedes it’s an improvement over the “vacuous” first proposal he rejected last year, he still describes the settlement as “paltry” and mocks BofA’s “coy refusal to concede the materiality of these nondisclosures.”
As noted last September, the essence of BofA’s defense is that they were simply acting on Wachtell’s advice. Though perennial alpha-firm is never named in the opinion, Wachtell is certainly on the receiving end of a pretty harsh benchslap by Rakoff for its “mincing and piecemeal approach to public disclosure” and its “apparent working assumption” that “not to disclose information if a rationale could be found for not doing so.” It will be interesting to see how Wachtell fares in the state court proceeding.
(Rakoff is not a dull or "mincing" writer. He even turns his mockery on to NY Attorney General Andrew Cuomo, whose parallel, pending case against BofA alleges that the bank engaged in a massive fraud. The judge-as-literary critic notes, regarding the language of the state’s complaint, “even in an era of purple prose, such language may seem the deepest violet.” The judge also manages to quote, somewhat mysteriously, “the great American philosopher Yogi Berra.”)
-posted by brian
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