NOT THE SHARPEST KNIFE IN THE DRAWER: Judge Rips BofA For Hypocritical Defense Strategy
Earlier this week, Manhattan federal district court Judge Jed Rakoff ruled that Bank of America cannot introduce into evidence expert testimony “asserting that media reports should have alerted shareholders to the billions it planned to pay Merrill Lynch executives after the 2008 merger” to defend itself against a lawsuit by the Securities and Exchange Commission, reports The American Lawyer:
BofA's point: Since shareholders should have known from media reports that bonuses would be paid, the bank's decision not to mention those bonuses in pre-merger disclosure materials was not important.
In rejecting that argument, Rakoff pointed to the bank's own proxy statement, which specifically cautioned investors not to rely on other sources of information about the merger. "In effect, the bank is arguing that, even though it expressly warned its shareholders to disregard the media, it can now defend itself by asserting that a reasonable shareholder would have disregarded these warnings and, by consulting the media, perceived that the bank's alleged lies were immaterial," wrote Rakoff. "Even a zealous advocate might perceive that such an argument hints at hypocrisy."
And guess who knew about the BofA bonuses – without having to read it in the papers? None other than Tiny Tim Geithner - chairman of the Federal Reserve Bank of New York at the time of the merger in December 2008 – who endorsed a deal for government funding to help BofA cushion losses incurred from its acquisition of Merrill Lynch. So Geithner is no stranger to hypocrisy, himself.
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