From Judge Rakoff's order (copy hosted at http://online.wsj.com/public/resources/documents/bofaorder914.pdf):
In other words, the parties were proposing that the management of Bank of America – having allegedly hidden from the Bank’s shareholders that as much as $5.8 billion of their money would be given as bonuses to the executives of Merrill who had run that company nearly into bankruptcy – would now settle the legal consequences of their lying by paying the S.E.C. $33 million more of their shareholders’ money.As Andrew Clark wrote yesterday in the Guardian: "Thank goodness for an independent judiciary."
[T]he notion that Bank of America shareholders, having been lied to blatantly in connection with the multi-billion-dollar purchase of a huge, nearly-bankrupt company, need to lose another $33 million of their money in order to “better assess the quality and performance of management” is absurd.
It is one thing for management to exercise its business judgment to determine how much of its shareholders money should be used to settle a case brought by former shareholders or third parties. It is quite something else for the very management that is accused of having lied to its shareholders to determine how much of those victims’ money should be used to make the case against the management go away.
Oscar Wilde once famously said that a cynic is someone “who knows the price of everything and the value of nothing.” Oscar Wilde, Lady Windermere’s Fan (1892). 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. The Bank of America states unequivocally that if the Court disapproves the Consent Judgment, it is prepared to litigate the charges. BofA Reply Mem. at 5. The S.E.C., having brought the charges, presumably is not about to drop them. Accordingly, the Court, having hereby disapproved the Consent Judgment, directs the parties to file with the Court, no later than one week from today, a jointly proposed Case Management Plan that will have this case ready to be tried on February 1, 2010.
(The Wall Street Journal adds: "We look forward to [the trial], especially in light of the recent news that Fed and Treasury knew all about these bonuses and stayed mum." a reference to allegations circulating in the blogosphere that the S.E.C may have been going easy on Bank of America in order to bury the claim that Chairman Bernanke and Secretary Paulson exerted pressure on Bank of America's CEO Ken Lewis not to talk about the problems at Merrill.
Perhaps we'll get to hear about it at trial.)
*Consistency for emphasis. See xkcd's take.