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SEC charges Bank of America with misleading investors

[JURIST] The US Securities and Exchange Commission (SEC) [official website] on Monday charged Bank of America [corporate website] with misleading investors [complaint, PDF] regarding billions of dollars paid to Merrill Lynch [corporate website] executives during the acquisition of the firm. The complaint alleges that, during the merger of the companies, the agreement for BOA to allow Merrill Lynch to pay discretionary bonuses was located in a separate document that was not disclosed prior to the shareholders' vote on the merger. The agreement allowed Merrill Lynch to pay up to $5.8 billion of the $50 billion merger consideration as executive bonuses. Ultimately, $3.6 billion in bonuses were paid to Merrill Lynch executives despite record losses in 2008. BOA agreed to settle [press release] with the SEC and pay a $33 million penalty but did not admit or deny the allegations. The terms of the settlement enjoin BOA from violating proxy solicitation rules set forth in § 14 of the Securities Exchange Act of 1934 [text].

Last week, BOA announced that it reached a settlement [JURIST report] with Italian dairy company Parmalat SpA [corporate website; JURIST news archive] in litigation stemming from the company's 2003 collapse. The settlement agreement dictates that BOA will pay Parmalat $100 million in cash and non-cash components, resolving a 2004 lawsuit brought against the bank. In June, the SEC charged [complaint, PDF; JURIST report] former Countrywide Financial Corporation officials with securities fraud arising from misleading investors about credit risks involved in the company's efforts to build and maintain their market share. Countrywide was acquired by BOA in July 2008, making the bank the nation's leading mortgage originator.

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Paper Chase is JURIST's real-time legal news service, powered by a team of 30 law student reporters and editors led by law professor Bernard Hibbitts at the University of Pittsburgh School of Law. As an educational service, Paper Chase is dedicated to presenting important legal news and materials rapidly, objectively and intelligibly in an accessible format.

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