Bank of America is fined $33M over Merrill bonuses

WASHINGTON - Bank of America Corp. has agreed to pay a $33 million penalty to settle government allegations that it misled investors about Merrill Lynch & Co. Inc.'s plans to pay bonuses to its employees, regulators said yesterday.

In seeking approval to buy Merrill last year, Bank of America told its shareholders that Merrill agreed not to pay year-end bonuses without Bank of America's consent. But the Securities and Exchange Commission says Bank of America already had authorized Merrill to pay $5.8 billion in bonuses.

That rendered the statement Bank of America mailed to 283,000 shareholders about the Merrill deal "materially false and misleading," the SEC said in its statement yesterday.

Bank of America, which is based in Charlotte, N.C., and has the fourth-largest share of deposits in the Philadelphia market, agreed to pay the $33 million to settle the allegations without admitting or denying wrongdoing.

The settlement is subject to court approval. Bank spokesmen did not immediately return calls for comment yesterday.

Bank of America agreed to buy Merrill in September, the same weekend that investment house Lehman Bros. Holdings Inc. collapsed. Merrill and other investment banks were reporting large losses from their investments in mortgage-backed securities.

Bank of America said in a November joint proxy statement for the acquisition that Merrill had agreed not to pay year-end performance bonuses or other incentive pay to executives before the closing without Bank of America's consent, the SEC said in yesterday's complaint, which was filed in U.S. District Court in New York.

Instead, "Bank of America had agreed that Merrill could pay up to $5.8 billion - nearly 12 percent of the total consideration to be exchanged in the merger - in discretionary year-end and other bonuses to Merrill executives for 2008," the SEC said in the complaint.

"Companies must give shareholders all material information about corporate transactions they are asked to approve," said Robert Khuzami, director of the SEC's enforcement division. "Failing to disclose that a struggling company will pay out billions of dollars in performance bonuses obviously violates that duty."