B of A EXECS SUED

A press release announced that the New York attorney General had filed civil fraud charges against Ken Lewis and Joseph Price of the Bank of America in connection with the failure to disclose Merrill losses before the shareholder vote to acquire Merrill. Whether this suit will go anywhere or not remains to be seen. Still pending are the approval of a Bank of America settlement of $150 million with the SEC arising out of the same issue. Unfortunately, if the settlement is approved, there is no indication that any part of the $150 million will accrue to the benefit of the shareholders. It would appear that the SEC will get the money. Instead, the Bank of America will pay the fine with shareholder money. But, it was the shareholders and not the SEC who were injured by the failure to disclose. Something is wrong with this picture. The judge should probably not approve the settlement unless it is clear that the money would be paid to the shareholders directly and not to the SEC. The Bank does not pay fines. They come out of shareholder funds. To penalize the shareholders for the banks failure to disclose would clearly be unfair. On he other hand, if Ken Lewis and/or Joseph Price knew about the losses, decided not to disclose them, and were found guilty or wrongdoing, then any penalty applied to them personally would go some distance to right the wrong from the shareholder viewpoint.,

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