WASHINGTON — Bank of America has agreed to pay a $33 million penalty to settle government charges that it misled investors about Merrill Lynch's plans to pay bonuses to its executives, regulators said Monday.
In seeking approval to buy Merrill, Bank of America told investors that Merrill would not pay year-end bonuses without Bank of America's consent. But the Securities and Exchange Commission said Bank of America had authorized Merrill to pay up to $5.8 billion in bonuses.
That rendered a statement Bank of America mailed to 283,000 shareholders of both companies about the Merrill deal "materially false and misleading," the SEC said in a statement.
Bank of America agreed to pay $33 million to settle the charges without admitting or denying the allegations. The settlement is subject to court approval.
New York Attorney General Andrew Cuomo, who referred the case to the SEC in April, said his investigation is continuing.
Bank of America is among the largest recipients of government aid, receiving $45 billion from the federal $700 billion bank rescue program.
Bank of America agreed to buy Merrill in a deal that was arranged Sept. 13 to 14, the same weekend that Lehman Brothers collapsed. Merrill ended up paying $3.6 billion in bonuses in 2008, the SEC said, even though it lost $27.6 billion that year.
Bank of America included a copy of the merger agreement with the proxy statement that it mailed to shareholders of both firms in November. That agreement said Merrill would not pay discretionary bonuses before the deal's closing, the SEC said. A separate agreement authorizing the bonuses wasn't mailed to shareholders, the SEC said.
Shareholders in both companies voted to approve the acquisition Dec. 5, which then closed Jan. 1. The SEC said the bonuses were paid Dec. 31.
"Companies must give shareholders all material information about corporate transactions they are asked to approve," said Robert Khuzami, director of the SEC's enforcement division. "Failing to disclose that a struggling company will pay out billions of dollars in performance bonuses obviously violates that duty."