Justice prevails … B of A shareholders shielded from double-jeopardy

The HomaFiles were all over this one early (thanks to a provocative inquiry from SMH — an MSB alum).  We raised the issue way before the WSJ or anybody else. 

In an Aug. 26 post, HomaFiles asked whether it was double jeopardy for shareholders if the SEC fines a company for misleading or defrauding its shareholders.

Apparently, the courts asked the same question …  and ruled accordingly.  Coincidence?

* * * * *

WSJ,  Judge Tosses Out B of A Bonus Deal, Sep 15, 2009

A federal judge threw out the Securities and Exchange Commission’s proposed settlement with Bank of America over its disclosure of controversial bonuses paid to Merrill Lynch employees, in an unusual ruling that casts doubts about how the agency handles probes of major U.S. companies.

The SEC declined to sue bank executives, saying the banks’ lawyers wrote the allegedly misleading language and it couldn’t find evidence that bank executives intended to mislead shareholders.

Instead, the SEC sued the company itself, i.e. the shareholders .

In a rare scuttling of an SEC settlement, Judge Rakoff said the $33 million fine levied on Bank of America “does not comport with the most elementary notions of justice and morality” because the company’s shareholders — the victims of the alleged misconduct — are the same people being asked to pay the fine.

The judge also had little sympathy for the SEC’s argument that it would be too difficult to pursue executives, since they had been guided by lawyers. “If that is the case, why are the penalties not then sought from the lawyers? And why, in any event, does that justify imposing penalties on the victims of the lie, shareholders?” he asked.

He also had harsh words for BofA, which has recently filed court papers claiming its proxy statement was neither false nor misleading. “If the Bank is innocent of lying to its shareholders, why is it prepared to pay $33 million of its shareholders’ money as a penalty for lying to them?”


Full article:

* * * * *

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s