Bank of America charged $33 million for lying to shareholders

In a case investigated by the Securities and Exchange Commission the largest US financial institution Bank of America has agreed to pay a $33 million penalty on charges that the bank misled investors about Merrill Lynch’s plans to pay bonuses to its executives. While in order to persuade investors to approve the deal BofA told them that Merrill would not pay year-end bonuses without Bank of America’s consent the SEC alleges Bank of America had authorized New York-based Merrill to pay up to $5.8 billion in bonuses.

This way, as the SEC says, the statement Bank of America mailed to 283,000 shareholders of both companies about the Merrill deal was “materially false and misleading.”

Andre Cuomo, NY Attorney General, who referred the case to the SEC in April, said his investigation is continuing. The SEC said its probe also is ongoing.

Charlotte, N.C.-based Bank of America agreed to purchase Merrill in a deal that was hastily arranged Sept. 13-14, 2008, the same weekend that Lehman Brothers collapsed. Bank of America CEO Ken Lewis and Merrill Lynch CEO John Thain announced the deal Sept. 15.

Bank of America included a copy of the merger agreement with the proxy statement that it mailed to shareholders of both firms in November. That agreement said Merrill would not pay discretionary bonuses prior to the deal’s closing, the SEC said. A separate agreement authorizing the bonuses wasn’t mailed to shareholders, the SEC said.

It was on December 5 when shareholders in both companies voted to approve the acquisition. According to the SEC allegations while the deal was closed on January 1, the bonuses were paid on December 31.