Note to banks accused of misleading investors: hypocritical defenses will not fly.
Bank of America told its investors that it would not pay bonuses to Merrill Lynch executives as part of the merger. At the same time, BOA authorized Merrill Lynch to pay up to $5.8 billion in discretionary year-end bonuses; $3.6 billion in bonuses were actually paid.
BOA argued shareholders were not misled because they should have disregarded BOA’s own statement, and relied on media reports that the bonuses would be paid out. US District Court Judge Rakoff was less than impressed by the argument.
In effect, the bank is arguing that, even though it expressly warned its shareholders to disregard the media, it can now defend itself by asserting that a reasonable shareholder would have disregarded these warnings and, by consulting the media, perceived that the bank’s alleged lies were immaterial . . . even a zealous advocate might perceive that such an argument hints at hypocrisy.
Update: The SEC is trying to add additional charges against BOA, alleging BOA knew about Merrill Lynch’s recent financial struggles, but failed to disclose them at a shareholder vote in 2008.
B of A’s Bonus Defense Hits Roadblock in NY Court | Courthouse News Service
(photo: James Callan)
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That’s funny. At least it sounds like more judges are growing fed up with banking shenanigans.