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B of A settles SEC lawsuit, shakeup continues

Bank of America agreed yesterday to pay a $33 million settlement with the Securities and Exchange Commission because it did not properly disclose to shareholders that Merrill Lynch executives would be getting billions in bonuses. The SEC says shareholders should have known this before they approved a merger between the two companies in early December. The news comes as the shakeup continues at the bank. WFAE's Simone Orendain has more: In a federal lawsuit, the SEC says the bank told shareholders it would only let Merrill Lynch pay out bonuses with the bank's consent. But the SEC says, the bank didn't tell shareholders at that time that they already okayed up to $5.8 billion in executive bonuses. The bonuses became public weeks after the merger closed on January first. Angry shareholders have been raising the issue since Merrill posted billions in losses in its final quarter as a stand alone company. A couple of months after the merger, shareholders saw their stocks dip as low as 75 percent. CtW Investments, a pension-fund investor with shares in Bank of America, was one of the most vocal critics. CtW Executive Director Bill Patterson is pleased with the settlement. "Oh this is huge," he says. "It's very important for investors and consumers. The SEC has acted as we and other shareholders have asked them to- to seek damages for the faulty disclosure that it provided shareholders." CtW and other investment groups have called for Bank of America CEO Ken Lewis' ouster. At the bank's annual meeting in April, shareholders voted to strip Lewis of the chairmanship on the bank's board. Patterson says the settlement will fuel other changes shareholders have been asking for. "It's coming late in the game, but it is coming. And the Bank of America board is changing, now it has to finish its job by changing its leadership at the top and removing Ken Lewis," says Patterson. Since Walter Massey took over as board chairman, four long-time directors have left the board and there have been changes in senior management. Yesterday the bank announced another shuffle of top executive. Among the changes, the head of branch banking and 20-year veteran Liam McGee, is leaving. UNC Charlotte Finance Professor Tony Plath says these recent developments put Lewis in a tenuous position. "He's got hostility from the institutional shareholders, he's facing hostility from the government. The government is reshaping his board and now it's reshaping his management team. It's gonna be very difficult for him to hang on and maintain his position as CEO," Plath says. But Cumberland Advisors investment portfolio manager Peter Demirali disagrees with Plath. He says Bank of America's stock has done exceptionally well in the last two months. He says, "I wouldn't count Ken Lewis out. I think he has certainly been maligned in the press and in front of Congress. But he really hasn't done that bad of a job and I think he's probably going to stick around a little bit longer than people expect." Demirali says the $33 million fine was a small price to pay for the bank, which is trying to put problems related to the Merrill merger behind it. Bank of America did not acknowledge any wrongdoing in its settlement with the SEC. And the bank believes the settlement quote "represents a constructive conclusion to this issue." Since Bank of America acquired Merrill Lynch, regulators, shareholders and Congress have been scrutinizing how the hasty deal came together in one weekend in September.