A federal judge in Manhattan ripped to shreds the arguments made by Bank of America and the Securities and Exchange Commission in defense of a $33 million settlement over allegations the bank lied to its shareholders about key details of its merger with Merrill Lynch.
A day after receiving the written explanations he had requested, US District Court Judge Jed Rakoff lambasted the arguments as “puzzling,” “vague” and “so at war with common sense.”
Last month, Rakoff declined to approve the $33 million settlement, saying it seemed too paltry to fit BofA’s alleged misdeeds. The SEC had accused BofA of lying to its shareholders about a whopping $3.6 billion in bonuses paid to Merrill Lynch employees on the eve of the merger, and both sides quickly settled, with the bank agreeing to pay the fine.
Rakoff put the kibosh on that pact last month, and requested both sides submit documents supporting why the $33 million fine was appropriate. Both camps turned in those documents Monday, but it seems clear it raised more questions for Rakoff.
Indeed, in explaining why the SEC didn’t charge any individuals at BofA, the agency said the bank blamed the lawyers and then invoked client-attorney privilege, preventing the SEC from determining who is responsible.
Rakoff challenged that claim, saying that anyone that could so easily hide from wrongdoing is “so at war with common sense.”