Of fraud, corruption and self-pity: What are corruption sanctions for?

October 3, 2009

The logic of Judge Rakoff is clean, whether one likes the consequence or not, so does his math. In rendering his decision on the Consent Judgment in S.E.C v Bank of America he considered the proposed agreement unfair, unreasonable and inadequate. According to the facts in the case, in the proxy statement that the Bank of America made to its shareholders for their approval of the merger with Merrill Lynch, it represented “…that Merrill had agreed not to pay year-end performance bonuses or other discretionary compensation to its executives prior to the closing of the merger without Bank of America’s consent[1]…what turned out not to be true. The S.E.C discovers this little problem (thus too late), wields its regulatory sword on the agreement and threats to sanction Bank of America. Short of issuing the sanction, the SEC and the Bank strike an agreement to reduce it: the Bank pays a fine of US$33 Million dollars  and is not expected to accept or deny the charges. This is the agreement the Judge was asked to give his blessing on. Read the rest of this entry »

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