By Zachary A. Goldfarb and Amit R. Paley
Washington Post Staff Writers
Tuesday, April 14, 2009
The Securities and Exchange Commission is reviewing whether Bank of America broke the law by failing to disclose bonuses it was planning to pay Merrill Lynch employees before buying the Wall Street investment bank last year.
Bank of America announced it was buying Merrill Lynch for $50 billion in September. But in seeking the approval of its shareholders, Bank of America did not disclose in a regulatory filing about the deal that it planned to pay $3.6 billion in bonuses to Merrill Lynch employees.
The SEC joins New York Attorney General Andrew Cuomo in looking into whether investors were misled because of the omission.
The bonuses were paid to Merrill Lynch employees in December. Those bonuses, as well as hundreds of millions of dollars in bonuses given to employees at American International Group and other bailed-out firms, have come under intense scrutiny from lawmakers and drawn public anger.
SEC Chairman Mary Schapiro disclosed the review by her agency in a letter to Rep. Dennis J. Kucinich (D-Ohio), chairman of the domestic policy subcommittee of the House Oversight and Government Reform Committee, who has been looking into the bonuses as well.
"Where the SEC believes that there has been an omission of material facts necessary in order to make the statements made not misleading, we will carry out our enforcement responsibilities with vigor and vigilance," Schapiro wrote. "We are carefully reviewing the Bank of America disclosure at this time."
Bank of America told the House committee that it disclosed everything it was required to disclose under laws governing public companies ahead of a Dec. 5 meeting to approve the merger with Merrill Lynch, according to the committee.
The SEC "has not expressed a view with respect to that question," Schapiro wrote in her letter. She said Bank of America had the responsibility to ensure "full and fair disclosure" since it had the "relevant facts about its business and corporate actions."
Schapiro's letter was unusual because the SEC seldom discloses inquiries into specific companies before it is ready to take regulatory action. An SEC spokesman cautioned that the letter does not confirm "the existence or non-existence of an enforcement investigation."
Bank of America spokesman Scott Silvestri declined yesterday to comment on the SEC review.
In New York, Cuomo and Bank of America have clashed over the bonus payments. The attorney general has subpoenaed the bank to obtain the names of bonus recipients and has alleged that Merrill Lynch expedited the bonus timetable to pay employees before the announcement of a $9.8 billion loss for the fourth quarter.
Bank of America had opposed turning over the names of bonus recipients, saying it would provide a road map to rivals about which employees the bank valued most. It ultimately agreed to provide the names of those who received the 200 highest bonuses.