Yesterday, Judge Jed S. Rakoff issued an order requesting additional information from the Securities and Exchange Commission and Bank of America in response to the proposed $150 million settlement for Bank of America’s alleged failure to disclose employee bonuses and financial losses at Merrill Lynch before shareholders approved the merger of the companies in December 2008.

In his order, Judge Rakoff noted that there were “very different interpretations of the underlying facts proposed by, respectively, the parties … and the Attorney General of the State of New York.” To adequately address the questions and concerns raised by New York Attorney General Andrew Cuomo in the lawsuit filed against Bank of America last Friday, Judge Rakoff today requested materials related to:

  • The December 2008 termination of Bank of America’s then-general counsel, Timothy Mayopoulos;
  • The “extent of participation” after November 18, 2008 by Bank of America’s attorneys at Wachtell Lipton Rosen & Katz in the evaluation of the disclosure issues raised by reports of increased losses at Merrill Lynch;
  • Whether anyone affiliated with Bank of America or its lawyers recommended a pre-merger disclosure to Bank of America shareholders about Merrill Lynch’s post-September losses; and
  • Whether anyone affiliated with Bank of America or its lawyers recommended a pre-merger disclosure regarding decisions that had been reached by the bank to allow Merrill Lynch to distribute billions of dollars in year-end bonuses.

According to the order, the parties have until February 16th to respond and provide the requested supporting materials.

The $150 million settlement was proposed earlier this month after Judge Rakoff rejected the prior proposed $33 million settlement in September 2009. In a United States District Court hearing in Manhattan on Monday, Judge Rakoff said he expected to rule on the new settlement by February 19th. However, he is reported to have stated that the settlement was “still quite small” and that $300 million or $600 million would be a more appropriate settlement amount. If Judge Rakoff rejects the proposed settlement, the case is set for trial on March 1, 2010.