Word: rakoff
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...judge threw out a proposed $33 million settlement between the Securities and Exchange Commission and Bank of America stemming from the company's January takeover of Merrill Lynch. The SEC had sued the bank over $3.6 billion in undisclosed bonuses paid to Merrill staff before the deal. Judge Jed Rakoff accused bankers and regulators of having a "cynical relationship" that penalizes shareholders rather than bank executives...
...Judge Jed Rakoff, in striking down the settlement, said fining the company - and thus its shareholders - for a misdeed of management was misplaced. "This proposal to have the victims of the violation pay an additional penalty for their own victimization was enough to give the court pause," wrote Rakoff in his decision...
...judge has ordered the case to go to trial as soon as next February. The SEC could instead try to strike a new settlement that satisfies the judge, but based on Rakoff's ruling, law professor John Coffee, who teaches a class with Rakoff at Columbia, says it is unlikely the judge would accept a substitute settlement that doesn't name any individual executives. Lewis, as the chief executive of the bank, is an obvious target. The SEC has yet to say whether it plans to pursue charges against Lewis or any other executive at Bank of America...
...Whatever the penalty, though, if Lewis is found to have lied about facts surrounding the Merrill merger, it is likely that the board will be forced to let him go. "Judge Rakoff is saying that executives need to be held accountable for the decisions they made," says Corporate Library's Minow. "I think heads will roll for this...
...District Court Judge Jed Rakoff, who is hearing the case, has said he wants to limit the case to the facts surrounding the relationship between Starr and AIG. Rakoff says he will not allow jurors to hear testimony about the accounting scandal that led to Greenberg's AIG exit or anything related to the insurance company's recent financial troubles, which resulted in a huge government bailout. Excluding the circumstances of Greenberg's exit may make it hard for AIG to prove that he ended Starr's AIG compensation plan because he was angry he had lost...