A Good Day for Shareholders
Three loud cheers for Judge Jed Rakoff, the judge that today rejected the $33 million settlement between the SEC and Bank of America, insisting that BoA “materially lied” to shareholders.
As Rakoff put it, the settlement “proposes that the shareholders who were the victims of the Bank’s alleged misconduct now pay the penalty for that misconduct”. This penalty, of course, only represents a fraction of the multibillion dollar alleged fraud that occurred.
As some readers of this blog might remember, it was Judge Rakoff who rejected the SEC’s $500 million settlement with Worldcom back in 2003. He eventually approved a $750 million fine but ruled that it be paid out to shareholders. Any new settlement between the SEC and BoA would likely be similarly structured with the proceeds going to the victims.
Judge Rakoff also describes the relationship between the SEC and BoA as “cynical,” explaining that Bank of America gets off with little more than a wrist slap while the SEC can pat itself on the back for its enforcement. This is easily the most important way the SEC can reform itself. If the SEC were tougher on the enforcement front and actually litigated cases, they would send a strong message to Wall Street.
This chapter in Bank of America’s long history is far from over. As reported today in the AP, New York Attorney General Andrew Cuomo is preparing charges against “several high-level executives at Bank of America,” which likely will include Ken Lewis. It is rumored that Mr. Cuomo will file civil charges against BoA for failing to disclose the Merrill Lynch bonuses to shareholders.
While the struggle for transparency continues, this was certainly a good day.
Jacob ("Jake") H. Zamansky is one of the country’s foremost authorities on securities arbitration law, the legal recourse for investors claiming broker wrongdoing, or for brokers claiming wrongful termination or other misconduct by their employer. Zamansky & Associates, the New York-based law firm he founded, represents both individuals and institutions in complex securities, hedge fund, and employment arbitrations.
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