- The Washington Times - Tuesday, August 4, 2009

Bank of America Corp. has 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 executives, regulators said Monday.

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 the Securities and Exchange Commission said Bank of America had authorized New York-based Merrill to pay up to $5.8 billion in bonuses.

That rendered a statement Bank of America mailed to 283,000 shareholders of both companies about the Merrill deal “materially false and misleading,” the SEC said.

Bank of America agreed to pay $33 million to settle the charges without admitting or denying the allegations. The settlement is subject to court approval.

“Bank of America believes that the settlement … represents a constructive conclusion to this issue,” company spokesman Scott Silvestri said in an e-mailed statement.

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

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

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.

The acquisition came as Lehman’s collapse caused panic in the financial markets and as investment banks such as Merrill faced billions of dollars in losses on soured mortgage investments.

Merrill ended up paying $3.6 billion in bonuses in 2008, the SEC said, even though it lost $27.6 billion that year, a record for the firm.

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.

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