New York Subpoenas Bank of America CEO on Merrill Bonuses (and Where is the SEC?)from www.nakedcapitalism.com
The digging by the New York attorney general, Andrew Cuomo, into the bonuses paid by Merrill Lynch immediately prior to the closing of its acquisition by Bank of America, are starting to take an interesting turn.
The proximate cause is that the bonuses were unseemly and unwarranted, which doesn't form the basis for legal action., but was enough for New York and North Carolina to launch investigations. But New York is now starting to hit some pay dirt. From the Wall Street Journal:
Bank of America Chairman and Chief Executive Kenneth Lewis was issued a subpoena by New York State Attorney General Andrew Cuomo, who is investigating whether the bank withheld information from investors in violation of state law, according to people familiar with the matter.
Mr. Lewis, who received the subpoena late last week, is the highest-profile subject of Mr. Cuomo's investigation into the Charlotte, N.C., bank's purchase of Merrill Lynch & Co. on Jan. 1. Mr. Cuomo's office is trying to determine if investors were misled about the depth of Merrill's losses in late 2008 and whether details of the bonuses to Merrill employees, contained in a nonpublic document, should have been disclosed to investors....
In particular, they wanted to know why the September merger agreement contained a nonpublic attachment that outlined the maximum Merrill could pay.
Now even with my rather creaky knowledge of securities laws, it sounds as if these state law violations would run afoul of federal securities law. So where is the SEC? Asleep at the wheel, of course. The SEC loves going after insider trading (it's always young, not hugely well connected perps) and after Madoff, has suddenly decided it had better take interest in hedge funds or other investment vehicles claiming too good or too consistent to be true returns. But that still leaves out a whole bunch of securities law breeches.
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