BofA defends settlement over Merrill Lynch bonuses

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Bank of America Corp. came out swinging today in defense of its hoped-for legal settlement with securities regulators over controversial bonuses at Merrill Lynch & Co.

The bank stressed in court papers that it never misled shareholders about the bonuses and that it repeatedly made clear that billions of dollars would be doled out to Merrill employees before its acquisition of the investment banking giant was completed Jan. 2.The filing urged a federal judge to approve a proposed settlement between it and the Securities and Exchange Commission.

The SEC has alleged that the bank misled shareholders into believing that Merrill would not pay year-end 2008 bonuses as it limped through a financially devastating year. In fact, the SEC alleged, the bank had already approved $5.8 billion in bonuses at Merrill, of which $3.6 billion was eventually doled out.

“Throughout 2008 – both before and after the merger agreement was signed – Merrill Lynch consistently disclosed its intention to pay incentive compensation in the range of multibillions of dollars,” the bank’s attorney, Lewis Liman, wrote.

BofA and the SEC are trying to convince U.S. District Judge Jed Rakoff to approve the $33-million settlement.

At a hearing two weeks ago, Rakoff blasted several key elements of the settlement and said he wouldn’t approve it until he gets additional information on several key points.

Among other things, Rakoff said he wants details on whether BofA intentionally misled shareholders about the bonuses, the names of which executives and lawyers approved the bonuses, and whether shareholders got sufficient information about Merrill’s weakening finances before they voted to approve the merger late last year.

Rakoff also said at the hearing that he was troubled by the proposed settlement amount, saying $33 million could be far too little if BofA was shown to have deceived shareholders.

-- Walter Hamilton

Earlier: BofA, SEC to file details on Merrill Lynch bonuses