Two weeks ago, Judge Jed Rakoff refused to approve the $33 million settlement between Bank of America and the SEC. He said he wanted more facts and ordered the parties to file briefs to that effect by today.
BofA published its brief earlier this afternoon. I’m reserving my opinion until I’ve had a chance to wade through the whole thing. In the meantime, I thought some readers might want to see it (click “more” below).
There are three docs: The final submission along with two affidavits, one from Stanford law professor Joseph Grundfest, the other from Dewey and LeBoeuf’s Morton Pierce (who got paid the tidy sum of $1,090 per hour for his work).
St. John’s Professor Anthony Sabino offers the following initial comments:
1. The Joe Grundfest Affidavit signifies that BofA is not fooling around.
Getting Joe Grundfest to give an affidavit is like sending up Derek Jeter to hit in the World Series—he’s “clutch.” Grundfest is one of the greatest scholars of his generation in the securities law field….His name alone lends a gravitas to what he has to say. Judge Rakoff will respect that.
2. The Grundfest Affidavit, particularly Para. 36.
Grundfest takes the critical step of pointing out the very powerful defenses available to BofA, essentially arguing that the gov’t could never win, and the Bank is settling this matter early rather than spend resources to litigate to a foregone conclusion, i.e., they would win anyway, but it’s cheaper to settle. That is often the gravamen of any settlement, so it’s important that a scholar as notable as Grundfest spells it out, apparently something that was lacking the first time out.
3. Substantial likelihood Judge Rakoff will now be satisfied, and settlement will be approved, BUT there is a slim chance the Judge may still hesitate, because it was reported that at the hearings the Judge wanted disclosure about individuals and their individual actions. From what I see of the BofA side, not much of that, so unless the SEC addresses that, the Judge may still ask questions.
But overall, I see this going through now. I would not bet against the side with a Grundfest affidavit.
The SEC hasn’t filed its brief yet; I will share that one when it hits.
At the moment, there isn’t another public hearing on the schedule. According to Rakoff’s office, if the judge decides to schedule another one, it will come after response briefs are filed on September 9th.