Bank of America pays $33m to settle Merrill Lynch bonuses case• BoA accepts penalty over merger payments to Merrill bankers
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Andrew Clark New York guardian.co.uk, Monday 3 August 2009

The embattled financial institution Bank of America is paying a $33m (£19.5m) fine to settle a prosecution by US regulators for keeping investors in the dark over billions of dollars of bonuses paid to Merrill Lynch bankers in the wake of a $50bn merger with the Wall Street brokerage last year.

In a fresh blow to the standing of chief executive Ken Lewis, the bank has agreed to pay the penalty after the Securities and Exchange Commission filed formal charges accusing it of making "materially false and misleading" disclosures to its shareholders.

Bank of America's purchase of Merrill at the height of Wall Street's meltdown in September saved the 95-year-old firm from oblivion. In a circular to shareholders in November, Bank of America attempted to short-circuit potential controversy over bonuses at the loss-making brokerage by saying that Merrill had agreed not to make any discretionary payments to its staff without its permission.

But, according to the SEC, Bank of America had already agreed to payouts of up to $5.8bn to Merrill's bankers. A sum of $3.6bn was eventually paid out despite losses at Merrill of $27.6bn for 2008.

Robert Khuzami, director of enforcement at the SEC, said: "Companies must give shareholders all material information about corporate transactions they are asked to approve. Failing to disclose that a struggling company will pay out billions of dollars in performance bonuses obviously violates that duty."

Bank of America's takeover of Merrill has been one of the most controversial episodes of the credit crunch on Wall Street. At one point, Bank of America considered pulling out of the deal because of ballooning losses at Merrill. But President Bush's treasury secretary, Henry Paulson, threatened to invoke extraordinary powers to sack Bank of America's entire board unless it pushed ahead with the deal.

Lewis has struggled to keep a lid on the outrage over his handling of the deal and over the size of payouts at Merrill. He was stripped of the role of chairman in a revolt by shareholders at the bank's annual meeting in April but he remains chief executive.

In an announcement coinciding with the SEC settlement, Bank of America reshuffled its management and appointed a high-profile former Citigroup executive, Sallie Krawcheck, as its head of global wealth and investment management. She is likely to feature heavily in any speculation over succession to the top job at Bank of America.

http://www.guardian.co.uk/business/2009 ... lynch-fine