BofA settlement will return some money to shareholders

Posted February 4, 2010

— Bank of America agreed to a series of reforms Thursday to resolve the pending state and federal investigations into whether the bank misled investors about Merrill Lynch when it acquired the Wall Street bank in late 2008.

Bank of America has been accused of failing to properly disclose losses at Merrill and bonuses paid to investment bank employees before the deal closed.

CEO Ken Lewis stepped down from Bank of America on Dec. 31 after almost a year of strife that followed the merger.

North Carolina Attorney General Roy Cooper announced the settlement, noting that shareholders could get up to $150 million from the bank in restitution for money lost. How that money will be distributed and to whom will be determined by the federal government, Cooper said. The agreement still must be approved by Judge Jed S. Rakoff of the United States District Court for the Southern District of New York.

The bank received $25 billion in bailout funds from American taxpayers and an additional $20 billion to help offset losses it absorbed as part of the Merrill Lynch acquisition. In December, Bank of America repaid both of those debts.

Bank of America leaders also agreed to maintain a hotline so employees can anonymously report any violations or problems and to meet semiannually with Cooper to discuss how whether they are sticking to the agreement.

“I’ve talked with the new leadership of Bank of America, and I appreciate their continued commitment to North Carolina and their willingness to resolve this dispute in a positive way,” Cooper said in a statement.

Bank of America will also pay $1 million to the state Department of Justice for consumer protection and education efforts.

The other terms of the federal settlement require that Bank of America:

  • Retain an independent auditor to audit internal disclosure controls.
  • Have its CEO and CFO certify that they have reviewed all annual and merger proxy statements.
  • Retain disclosure counsel who will report to and advise the board’s Audit Committee on the bank’s disclosures, including current and periodic filings and proxy statements.
  • Adopt a “super-independence” standard for all members of the board’s Compensation Committee that prohibits them from accepting other compensation from the bank.
  • Maintain a consultant to the Compensation Committee that meets super-independence criteria.
  • Provide shareholders with an annual non-binding say on executive compensation.
  • Implement and maintain incentive compensation principles and procedures and prominently publish them on Bank of America’s Web site.

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  • james27613 Feb 4, 2010

    Who knows what really happened when the FED made all the
    monster mega bank CEO's fly in for the big secret meeting
    all behind closed doors.

    This merger happened so fast no time to crunch the real numbers.

  • blisstate Feb 4, 2010

    What BOA did was criminal and its entire board knowing approved it. I am physically sick over this agreement by BOA. The same criminal board is still in place, no one is going to jail, Americans for generations will be paying for this with taxes and jobs and the same crooked investors are calling the shots with not a single new regulation in place. Most of all, BOA can still count on a bailout next time.

  • blackdog Feb 4, 2010

    Deregulations allowed these practices to occur.

  • affirmativediversity Feb 4, 2010

    Personally Bank of America can go bust for all I care. They have never had the best interest of their stock holders or the US economy in mind. They are the poster child for SELF SERVING.

    I'm still wondering how and why they got away with GIVING CREDIT CARDS TO CRIMINAL MIGRANTS or allowing them to open bank accounts WITHOUT an SSN?????????

    I they still do that?????

  • lilluke0 Feb 4, 2010

    It really makes me ill to hear that some of these banks are poised to continue paying these CEOs and others these outrageous bonues. Talking about that's the way to hold onto good help,they're the ones that help them cause this problem
    and end up becoming millionaires. They don't need anymore!

  • lilluke0 Feb 4, 2010

    To me it sounds like the government should have applied the same type of procedural obligations on all those who caused this disaster and put a cap on those outrageous bonuses, if not we will be back in the same rut as before!!

  • aspenstreet1717 Feb 4, 2010

    I thought BOA take over of Merrill was a shot gun marriage with the Gov holding the shot gun.

  • Fishman Feb 4, 2010

    I'll believe that when I receive my check. B of A will spend 200 million on lawyers just so they don't have to pay out 150 million. Ken Lewis and his cronies are the true believers of the Golden Rule for the 21st century. "Those that have the gold make the rules and the rules are they get to keep more of the gold."

  • blackdog Feb 4, 2010

    And now the current administration wants to separate commercial from private banks to protect the taxpayers.

  • Gork Feb 4, 2010

    From an article about a civil lawsuit filed today against BoA, Ken Lewis and others -- According to the lawsuit, former CEO Ken Lewis and former CFO Joe Price hid more than $16 billion worth of losses at Merrill from shareholders in order to ensure their approval of the merger. But after shareholders voted to buy the ailing firm, the bank approached the government to demand an infusion of taxpayer cash. Without bailout funds, they told regulators, BofA would be unable to complete the merger. The government capitulated and funneled $20 billion of TARP money into the bank.

    That doesn't sound like BoA was forced to accept TARP money to me...