(CN) – A federal judge in Manhattan refused to approve Bank of America’s $33 million settlement with the SEC, sharply criticizing the bank for authorizing billions of dollars in bonuses for Merrill Lynch executives before the companies merged last year.
U.S. District Judge Jed S. Rakoff said Bank of America and Merrill Lynch “effectively lied to their shareholders” by failing to disclose the payouts. Bank of America allegedly gave Merrill Lynch permission to pay up to $5.8 billion in year-end bonuses – nearly 12 percent of the $50 billion merger.
Though Merrill Lynch ended up paying $3.6 billion in bonuses, the payouts came in a year when the company suffered a record loss of more than $27 billion.
Rakoff called the $33 million settlement “strangely askew” given the severity of the accusations and the subsequent federal bailout of Bank of America. The fine is less than 1 percent of the bonus money.
“Do Wall Street people expect to be paid large bonuses in years when their company lost $27 billion?” the judge asked.
He gave the SEC and the bank two weeks to submit more information.