Fed judge Rakoff speaks common sense

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At Last, BofA Shareholders Find a Friend
From Bank of America’s top executives to its regulators at the Securities and Exchange Commission, everyone seemed ready to put the past behind them. Not Federal District Court Judge Jed S. Rakoff.
The judge has just thrown out a proposed $33 million settlement of SEC allegations that BofA misled shareholders about bonuses paid to employees of Merrill Lynch in December 2008, just before the North Carolina bank was to purchase the Thundering Herd in a $50 billion deal..."the proposed Consent Judgment in this case suggests a rather cynical relationship between the parties: the S.E.C. gets to claim that it is exposing wrongdoing on the part of the Bank of America in a high-profile merger; the Bank’s management gets to claim that they have been coerced into an onerous settlement by overzealous regulators. And all this is done at the expense, not only of the shareholders, but also of the truth. Yet the truth may still emerge.
...Rakoff states plainly and repeatedly that the bank “lied” to its shareholders that it had agreed to $5.8 billion of bonuses to Merrill executives in 2008...without seeing shareholder approval.
Rakoff says fining the company would unfairly hurt its shareholders, who were already “blatantly” lied to. “This proposal to have the victims of the violation pay an additional penalty for their own victimization was enough to give the Court pause,” he said. And he called “absurd” the SEC’s reasoning that it didn’t matter that the fine was penalizing shareholders because in the end it would send a strong message...
Why could the SEC fine BofA the company and not any of its executives, he wondered, sloughing off SEC argument that the executives can’t be cited because they relied on their lawyers to come up with the disclosure statements. “So why didn’t the SEC charge the lawyers ?” Rakoff asked....