Bank of America, preparing for its March trial with the Securities and Exchange Commission, got good news and bad news on Monday.
First, the bad news: The SEC confirmed that it wants to expand its charges against the bank, saying the Charlotte company should have informed shareholders about mounting losses at Merrill Lynch before it bought the struggling investment firm. Originally, the SEC had focused its charges on whether the bank should have informed shareholders about $3.6 billion in bonuses for Merrill employees.
The good news: The SEC said that it will not charge any individuals at Bank of America, or at its outside law firms, in connection with the Merrill losses. Though the bank executives should have disclosed the problems at Merrill, they did not deliberately conceal information from their lawyers or otherwise act "with intent to mislead," the SEC said.
Bank of America spokesman Bob Stickler said the bank was pleased that no individuals would be charged. But he said the potential new charges are a "legal maneuver" that "are without merit, and we will oppose this motion."
The bank also said that the SEC is amending its complaint "at the 11th hour," and that the late date will hurt the bank's ability to mount a defense. In a letter last week to Judge Jed Rakoff, the bank said it had not begun to search for relevant documents and did not know whether key witnesses would be available in relation to the Merrill losses. Many of those executives, including former Merrill CEOs Stan O'Neal and John Thain, are not with Bank of America, the lawyer pointed out.
The lawyer, Daniel Kramer of the New York law firm Paul, Weiss, Rifkind, Wharton & Garrison, also pointed out that the fact discovery process is over and it's too late to submit expert reports. And he said the charges would be futile anyway, since they have no legal basis. Bank of America has vehemently denied wrongdoing throughout its tangle with the SEC.
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