BofA’s tiny SEC fine

By Felix Salmon
August 3, 2009
pay $33 million in fines to the SEC. That's less than 0.92% of the bonuses in question.

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File under “failed incentives”: Bank of America lied about $3.6 billion in Merrill Lynch bonuses, and as a result will pay $33 million in fines to the SEC. That’s less than 0.92% of the bonuses in question.

If I were Citigroup, and the Feds were telling me not to pay Andrew Hall his $100 million bonus, I’d be inclined to just pay it anyway. And then sheepishly apologize and pay a $920,000 fine. So much easier than doing the right thing from the beginning.

9 comments

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Another example, Felix, of how the SEC is broken beyond repair. Its enforcement fines and penalties are so small, and so after the fact, that they have almost no deterrent effect, particularly on large firms. Big Wall Street firms view SEC fines the way UPS and FedEx view parking tickets in Manhattan: as a minor inconvenience and cost of doing business.

Likewise, just as NYC uses parking tickets primarily as a source of general revenue, rather than as an economic deterrent to illegal behavior, the SEC must view fines as simply another source of operating revenue.

A more cynical, counterproductive system of encouraging scofflaws and corrupt enforcement would be hard to find.

Superb point, Felix – and one that should be discussed far more.

This is PRECISELY the thinking I’ve heard within both large and small banks in my 10 years as a compliance officer: let’s do it anyway, because even if they catch us the fine is so minimal that it’s just part of the cost of doing business.

Don’t ever forget the famous Ford Pinto case. This is all about the same thought process, except that here, nobody dies in flames from an exploding gas tank – so the reputation risk is lower.

That is, IMHO, exactly why this meltdown has occurred, and all the bailouts have done is to confirm that this is the most appropriate approach from a business perspective.

The ultimate end of any moral hazard is the complete revision of the previously existing social consensus on morality. At some point, the culture implodes from the weight of a cognitive dissonance that cannot be peacefully resolved.

Posted by Eric Dewey | Report as abusive

Puts the lie to “No Pain, No Gain”

Posted by Dennis Kreiss | Report as abusive

It’s easier to ask for forgiveness than to ask for permission…

Posted by monmick | Report as abusive

Maybe the SEC wanted to fine them more but they don’t want to harm BOA’s already suspect capital ratios…

Posted by Thisson | Report as abusive

Now looks like a NY judge may be nixing the deal. Maybe there is justice after all …

Judge won’t approve Bank of America, SEC settlement

By Jonathan Stempel

NEW YORK (Reuters) – A U.S. federal judge has refused to approve Monday’s settlement between the U.S. Securities and Exchange Commission and Bank of America Corp related to the acquisition of Merrill Lynch & Co.

In an order on Wednesday, Judge Jed Rakoff of the federal district court in Manhattan said it may be unfair to the public to accept the settlement, which would resolve SEC allegations that Bank of America made false and misleading statements to shareholders about bonuses promised to Merrill employees.

Bank of America had agreed to pay $33 million to settle the civil lawsuit, and along with the SEC had sought the judge’s approval for the settlement. Rakoff set a hearing on the matter for the afternoon of August 10.

In its complaint, the SEC had alleged that Bank of America told investors in proxy documents for the Merrill merger that Merrill had agreed it would not award year-end performance bonuses or incentive pay before the merger closed.

In fact, the SEC alleged that Bank of America had already authorized Merrill to pay up to $5.8 billion of bonuses. Merrill would ultimately pay $3.6 billion, according to regulators.

The merger closed on January 1, 2009. Two weeks later, Bank of America accepted $20 billion from the federal Troubled Asset Relief Program to help it absorb Merrill.

“Despite the public importance of this case, the proposed consent judgment would leave uncertain the truth of the very serious allegations made in the complaint,” Rakoff wrote in his two-page order.

“The proposed consent judgment in no way specifies the basis for the $33 million figure or whether any of this money is derived directly or indirectly from the $20 billion in public funds previously advanced to Bank of America as part of its ‘bailout,’” the judge added.

Neither Bank of America nor the SEC immediately returned requests for comment. Bank of America is the nation’s largest bank, and is based in Charlotte, North Carolina.

The case is SEC v. Bank of America Corp, U.S. District Court, Southern District of New York (Manhattan), No. 09-6829.

(Reporting by Jonathan Stempel; Editing by Valerie Lee)

Posted by monmick | Report as abusive

Well I agree…sort of.

I think the position you (and many others) are taking here is mixing apples and oranges.

First and foremost I do not agree it’s the government’s job to tell a business how much it should pay its employees. Top talent costs top money period.

The problem here is that the government has allowed for the financial system to develop a fairly unstable and insecure state by not applying clear and strict regulation standards; I blame FED and SEC for letting the whole thing out of hand long ago, with AIG and all, and then charging some of them selectively as if that matters.

In the case of BAC, the bank was actually standing on FED’s side in their attempt to save the collapsing system. The whole deal has happened overnight and it’s beyond doubt that first and foremost, BAC management may or may not have known all of the ML internal affairs, but it comes to reason that it is more likely for them to NOT have known everything.
But let us presume they DID know and indeed did NOT release it on purpose.
I do not blame them for it.
They were saving FED’s ass, for pit sake, by taking over a giant black hole.
What do you expect them to do, piss off the little value that was in it by cutting their bonuses?
Because everyone else was doing just that?

Oh, come on, you have to have more brain than that!

BAC was a stable, conservative and reasonably well run bank, which was pouring money – with its own interest in mind, of course, but since when this is bad in capitalism – at a time when the system was falling apart because of dumb asses who not only have been lying, but also proved bad business managers as well.

And what, the reward for that is the bad asses walking away with personal gain after corporate bankrupcies while stable corporations being penalized for it?

Again, come on!

Judge rejects settlement. This is a good development that a Judge is not willing to allow the settlement, especially since the settlement is presented on the same day the complaint is filed.

The case was filed, and before it could be reviewed by watchdogs of SEC abuse, settled the same day. A flash bang, designed to go off and stun anyone who tries to understand what the vermin at the SEC have just done.

The Judge gives us reason to pause. Thank God. Someone is doing the more serious work of trying to restore public trust. Because the SEC does not mention the public-interest in any of the 13 pages of its complaint. …Note: It only takes the Honorable Judge Jed Rakoff 2 pages to speak of the public. A glaring omission of Mary Schapiro’s SEC.

When I read the complaint, written by David Rosenfeld of the SEC, under care and supervision of Mary Schapiro, it was clear the SEC is acknowledging deception in financial matters, but then fails to name the individual investment brokers or executives involved. Such an omission, is a beacon-indicator: More corruption is at work in the SEC and the agency is acting exactly like it did when Christopher Cox ran the show. One is left to wonder, if Chrissy left his skirting-the-law outerwear in the executive office closet, because Mary Schapiro is doing the same skirt-hiking song and dance routine, in failing to name the offending and dishonest brokers, individually, in the complaint, (a service the compromised regulator performs, often delights in performing, for the benefit of the offending brokers who are supposedly being reformed).

Service intent in deference to offending parties in questions:

1) Omitting to prosecute the more serious offenses of the parties involved @ actual fraud. Consists of deceit, artifice, trick, design, some direct and active operation. Includes cases of successful deployment of any cunning or deceptive act to circumvent law or cheat another. 2) Omitting to prosecute constructive fraud. Fraud is actual or constructive. Constructive fraud consists of BREACH OF DUTY, which in a pattern of behavior can be shown to produce gain or advantage to the dishonest broker or executives at fault. 3) Fraud in factum: Misrepresentation as to the nature of a writing that a person signs (such as a proxie vote), without knowledge nor reasonable opportunity to obtain knowledge because the ones with the knowledge are acting in a pattern to withold it. See 2 above. 4) Omitting to prosecute professional misconduct.
5) Omitting to prosecute fraudulent concealment: The hiding or suppression of a material fact or circumstance which the party is legally or morally bound to disclose. 6) Failing to prosecutive fraudulent conversion: Receiving into possession money or property of another and using dishonesty to fool a party, converting that money or applying the same to or for one’s use, benefit or personal wealth enrichment.

Curiously the SEC acknowledges the dishonesty but acts itself, to 7) conceal the names of the offending individuals who engaged in the financial deceptions aimed at shareholders. 8) The SEC fails in its mission and fiducial duty to inform the public who the offending parties are, so the public can be fairly warned of their names and license numbers that put the offending actors, formerly, in good standing with FINRA and the SEC. Presumably if they are dishonest to clients or shareholders the SEC would want the public to be fairly warned, especially if these offending parties use dishonesty to fraudulently convert other people’s money to their own wealth.

9) If a senior citizen signed a proxie statement by being first deceived, by bad faith actors, and was told there “would be no bonus” to Merrill Lynch, and then got lied to, such that they cannot retrieve their signature because the vote was already counted, such is grounds for prosecution on abuse or taking advantage of the elderly.

Ms. Schapiro’s SEC fails to do even the bare minimum as concerns protecting the public from more of same, at least giving the names of the offenders and recommending censure, so the public can perform due diligence and see what they were sanctioned for.

Concealing the names of the mischief-executives and persons who engaged in the financial deceptions, is an offense perpetrated by the regulatory agency itself. The officer on the complaint for the SEC is a New York based agent by the name of David Rosenfeld. Probably expecting a job promotion in a year or two, and to a firm that pays far more than the SEC.

The SEC fails once again in its mission, to protect the public from abuse in financial/investing related matters.

Mary Schapiro is a weak regulator and her personhood is questionable at this first sign of what the SEC looks like under her leadership. It is really not leadership. She was probably selected for her tendency to do what she is told.

Her agency is trying to jump this settlement off in the court, in flash-bang style. But the omissions referenced above tell the true story, and reflect badly on her integrity as a person. She looks alot like Ben Bernanke and Christopher Cox here, with Sheila Bair looking over their shoulders and failing to make bold public denouncement and outcry over the many perverse violations of law and omissions in upholding the law – so that it serve to protect Americans, rather than subject them to abuse. In failing to protect the public, she pushes the public to an edge of worry or corner of demoralizing financial burdens. The public actually has no good representation at the SEC, Federal reserve, Secretary of Treasury, with Congress (see autumn 2008) nor with the FDIC (see the regulatory agency which was suppose to say loud and clear, NO Bonus pay this year, make due with a turkey ball – the nation is in a declared state of economic emergency).

As long as the silent majority have no representation, but are continually being taxed or imposed upon financially, via these many over-running vermin and repetition of offensive behavior against even the elderly, and no law coming to bear to protect them – no president crying out boldly and with vigor to denounce the abuse, they cannot realistically defend their happiness or their way of life, nor their senior parents, without resorting to violence.

Mary Schapiro is as much what is wrong with the SEC as was Christopher Cox. As much what is wrong with America as dirty ass fuck-America-HankPaulsonorGoldmanSachs. Schapiro comes in following the abuse and winks white collar criminal behavior and group acting in dishonesty schemes, aside.

She has no sense of integrity or fortitude in how to manage a case, so that it serves as a lasting deterrent to future generations.

A 100 year flood – no joke – the worst flow of executive corruption in the last 2000 years, right here at home – while our military is stationed 6500 miles away, and our best fighting men are being killed on foreign soil. http://answers.yahoo.com/question/index? qid=20081026063116AAkhpnU http://www.blurtit.com/q210451.html

All Hail Goldman Sachs. All Hail the man who in 2002-2006 oversaw the bundling and packaging of what he would later call “toxic assets,” for what better to leverage against the American people, while their son’s are dying on foreign soil. If it was just a regular asset it would not be so terroristic. But with a “toxic asset” … a domestic enemy of the United States could do far more damage.

All Hail Lloyd Blankfein. All Hail Jamie “BitchGodess” Dimon of the Derivatives Market. All Hail John Mack the benevolent one who fails to speak up for capitalism and capitalist rule of law – during a crisis. Utterly fails to defend it at any time since that period. All Hail Ben Bernanke, who tho timid, duly kiss Paulson’s ring hand and worships at the alter of white supremecy in the Federal reserve with all the wig-wearing governors on the board also bowing down at the same hand and alter.

All Hail Front Running, and using tax payer money to pay programmers for faster code and upgrades on the corporations mainframes cause we sure as hell weren’t using the money to refinance anybody’s house. All Hail the beastmasters of injustice who fornicate over the law, after flaunting it. Do what he says Nancy, he has fixed “toxic assets” bundled them around Junior’s abdomen. Give him whatever he asks.

And the creature spoke: Asking or rather GS asking through their captured lobbyists, paid for by tax payer money because they weren’t lending to small business either. .. .that Mary Schapiro be appointed to run the SEC in Christopher Cox’s absence.

Here is to Judge Jed Rakoff. Mud in your eye Judge if you are just holding out for your cut. We will know it if this pause does not result in criminal prosecution of white collar crime under at least one of the items mentioned above. And a stiff sentence handed down on the group of dishonest brokers and offenders.

Fade
to
music

“Let us not talk falsely now, for the hour is getting late…”

http://www.youtube.com/watch?v=5wfub-LbO mk

http://www.youtube.com/watch?v=bBhv-wlb2 70&feature=related

http://www.youtube.com/watch?v=wS_xQ9H9r aU&feature=fvw

Posted by AllAlongtheWatchTower | Report as abusive

Judge rejects settlement. This is a good development that a Judge is not willing to allow the settlement, especially since the settlement is presented on the same day the complaint is filed.

The case was filed, and before it could be reviewed by watchdogs of SEC abuse, settled the same day. A flash bang, designed to go off and stun anyone who tries to understand what the vermin at the SEC have just done.

The Judge gives us reason to pause. Thank God. Someone is doing the more serious work of trying to restore public trust. Because the SEC does not mention the public-interest in any of the 13 pages of its complaint. …Note: It only takes the Honorable Judge Jed Rakoff 2 pages to speak of the public. A glaring omission of Mary Schapiro’s SEC.

When I read the complaint, written by David Rosenfeld of the SEC, under care and supervision of Mary Schapiro, it was clear the SEC is acknowledging deception in financial matters, but then fails to name the individual investment brokers or executives involved. Such an omission, is a beacon-indicator: More corruption is at work in the SEC and the agency is acting exactly like it did when Christopher Cox ran the show. One is left to wonder, if Chrissy left his skirting-the-law outerwear in the executive office closet, because Mary Schapiro is doing the same skirt-hiking song and dance routine, in failing to name the offending and dishonest brokers, individually, in the complaint, (a service the compromised regulator performs, often delights in performing, for the benefit of the offending brokers who are supposedly being reformed).

Service intent in deference to offending parties in questions:

1) Omitting to prosecute the more serious offenses of the parties involved @ actual fraud. Consists of deceit, artifice, trick, design, some direct and active operation. Includes cases of successful deployment of any cunning or deceptive act to circumvent law or cheat another. 2) Omitting to prosecute constructive fraud. Fraud is actual or constructive. Constructive fraud consists of BREACH OF DUTY, which in a pattern of behavior can be shown to produce gain or advantage to the dishonest broker or executives at fault. 3) Fraud in factum: Misrepresentation as to the nature of a writing that a person signs (such as a proxie vote), without knowledge nor reasonable opportunity to obtain knowledge because the ones with the knowledge are acting in a pattern to withold it. See 2 above. 4) Omitting to prosecute professional misconduct.

5) Omitting to prosecute fraudulent concealment: The hiding or suppression of a material fact or circumstance which the party is legally or morally bound to disclose. 6) Failing to prosecutive fraudulent conversion: Receiving into possession money or property of another and using dishonesty to fool a party, converting that money or applying the same to or for one’s use, benefit or personal wealth enrichment.

Curiously the SEC acknowledges the dishonesty but acts itself, to 7) conceal the names of the offending individuals who engaged in the financial deceptions aimed at shareholders. 8) The SEC fails in its mission and fiducial duty to inform the public who the offending parties are, so the public can be fairly warned of their names and license numbers that put the offending actors, formerly, in good standing with FINRA and the SEC. Presumably if they are dishonest to clients or shareholders the SEC would want the public to be fairly warned, especially if these offending parties use dishonesty to fraudulently convert other people’s money to their own wealth.

9) If a senior citizen signed a proxie statement by being first deceived, by bad faith actors, and was told there “would be no bonus” to Merrill Lynch, and then got lied to, such that they cannot retrieve their signature because the vote was already counted, such is grounds for prosecution on abuse or taking advantage of the elderly.

Ms. Schapiro’s SEC fails to do even the bare minimum as concerns protecting the public from more of same, at least giving the names of the offenders and recommending censure, so the public can perform due diligence and see what they were sanctioned for.

Concealing the names of the mischief-executives and persons who engaged in the financial deceptions, is an offense perpetrated by the regulatory agency itself. The officer on the complaint for the SEC is a New York based agent by the name of David Rosenfeld. Probably expecting a job promotion in a year or two, and to a firm that pays far more than the SEC.

The SEC fails once again in its mission, to protect the public from abuse in financial/investing related matters.

Mary Schapiro is a weak regulator and her personhood is questionable at this first sign of what the SEC looks like under her leadership. It is really not leadership. She was probably selected for her tendency to do what she is told.

Her agency is trying to jump this settlement off in the court, in flash-bang style. But the omissions referenced above tell the true story, and reflect badly on her integrity as a person. She looks alot like Ben Bernanke and Christopher Cox here, with Sheila Bair looking over their shoulders and failing to make bold public denouncement and outcry over the many perverse violations of law and omissions in upholding the law – so that it serve to protect Americans, rather than subject them to abuse. In failing to protect the public, she pushes the public to an edge of worry or corner of demoralizing financial burdens. The public actually has no good representation at the SEC, Federal reserve, Secretary of Treasury, with Congress (see autumn 2008) nor with the FDIC (see the regulatory agency which was suppose to say loud and clear, NO Bonus pay this year, make due with a turkey ball – the nation is in a declared state of economic emergency).

As long as the silent majority have no representation, but are continually being taxed or imposed upon financially, via these many over-running vermin and repetition of offensive behavior against even the elderly, and no law coming to bear to protect them – no president crying out boldly and with vigor to denounce the abuse, they cannot realistically defend their happiness or their way of life, nor their senior parents, without resorting to violence.

Mary Schapiro is as much what is wrong with the SEC as was Christopher Cox. As much what is wrong with America, as overly-indulgent-executives at Goldman Sachs taking turns with Hank Paulson to ass-fuckthe-Country-taking-turns-while-t hey have the common-strapped over thebarrel-ofhighspeedoiltrading set-to count time, with a bundle of “toxic assets” on top of that. Schapiro comes in following the abuse and winks aside white collar criminal behavior and group acting in dishonesty scheme.

She has no sense of integrity or fortitude in how to manage a case, so that it serves as a lasting deterrent to future generations.

A 100 year flood – no joke – the worst flow of executive corruption in the last 2000 years, right here at home – while our military is stationed 6500 miles away, and our best fighting men are being killed on foreign soil. http://answers.yahoo.com/question/index? qid=20081026063116AAkhpnU http://www.blurtit.com/q210451.html

All Hail Goldman Sachs. All Hail the man who in 2002-2006 oversaw the bundling and packaging of what he would later call “toxic assets,” for what better to leverage against the American people, while their son’s are dying on foreign soil. If it was just a regular asset it would not be so terroristic. But with a “toxic asset” … a domestic enemy of the United States could do far more damage. Frighten even their confused Congressmen….Give him what he wants Martha….He’s got toxic assets bundled like a bloody garland around our daughters head. Do what he says.

All Hail Lloyd Blankfein. All Hail Jamie “BitchGodess” Dimon of the Derivatives Market. All Hail John Mack the benevolent one who fails to speak up for capitalism and capitalist rule of law – during a crisis. Utterly fails to defend it at any time since that period. All Hail Ben Bernanke, who tho timid, duly kiss Paulson’s ring hand and worships at the alter of white supremacy in the Federal reserve with all the wig-wearing governors on the board also bowing down at the same hand and alter.

All Hail Front Running, and using tax payer money to pay programmers for faster code and upgrades on the corporations mainframes cause we sure as hell weren’t using the money to refinance anybody’s house. All Hail the beastmasters of injustice who fornicate over the law, after flaunting it. Do what he says Nancy, he has fixed “toxic assets” bundled them around Junior’s abdomen. Give him whatever he asks.

And the creature spoke: Asking or rather GS asking through their captured lobbyists, paid for by tax payer money because they weren’t lending to small business either. .. .that Mary Schapiro be appointed to run the SEC in Christopher Cox’s absence.

Here is to Judge Jed Rakoff. Mud in your eye Judge if you are just holding out for your cut. We will know it if this pause does not result in criminal prosecution of white collar crime under at least one of the items mentioned above. And a stiff sentence handed down on the group of dishonest brokers and offenders.

Fade
to
music

“Let us not talk falsely now, for the hour is getting late…”

http://www.youtube.com/watch?v=5wfub-LbO mk

http://www.youtube.com/watch?v=bBhv-wlb2 70&feature=related

http://www.youtube.com/watch?v=wS_xQ9H9r aU&feature=fvw

Posted by AllAlongtheWatchTower | Report as abusive