NEW YORK — Bank of America agreed to provide new information about bonus payments made to Merrill Lynch executives just before the bank acquired the troubled Wall Street firm last year, officials said Tuesday.
The agreement came after a judge overruled a multimillion dollar settlement between the bank and federal regulators over the controversial bonus issue and ordered the case go to trial.
"We have reached agreement with the Bank of America on proposed terms of a court order governing disclosure of information previously withheld on the basis of legal privileges," the US Securities and Exchange Commission (SEC) said in a statement.
"If entered by the court, the order would result in a broad waiver of the attorney-client and other legal privileges on matters that are the subject of our pending action against the Bank as well as ongoing investigation," SEC spokesman John Heine said.
The order would particularly allow the SEC "to assess further details surrounding the bank's failure to disclose to its shareholders critical information concerning the award of bonuses to Merrill employees, including any relevant information previously withheld."
In addition, the order would allow for investigation of previously privileged details of the bank's agreement to buy Merrill Lynch.
"The order would also authorize any information disclosed to the SEC to be disclosed to other governmental authorities, including federal and state regulators, so that they are able to assess the same information as the SEC," Heine said.
The order was subject to approval by Federal Judge Jed Rakoff who last month tossed out a settlement plan by Bank of America and the SEC.
The bank had agreed to pay a penalty of 33 million dollars to the authorities "for misleading investors" about 3.6 billion dollars in bonuses paid to Merrill executives just as the firm was to be merged with Bank of America to avoid a Merrill bankruptcy.
The SEC and Bank of America then jointly filed a "case management plan" in court outlining steps they plan to take before heading to trial on February 1, 2010.
Merrill Lynch's payment of cash bonuses on December 29, just ahead of the finalization of its acquisition by Bank of America on January 1, sparked an outcry in the United States over executive compensation, particularly involving government bailed-out firms.
Merrill had posted a bigger-than-expected 2008 fourth-quarter loss of 15.8 billion dollars and Bank of America had received 20 billion dollars in federal aid to help it acquire the nearly bankrupt firm.
Bank of America repeatedly insisted it had left Merrill to operate independently before the takeover, as required by law, and had asked Merrill for updates about its situation after the takeover deal was signed in September.
Under details of the new agreement, the court order would also allow for investigations of "previously privileged details" of Bank of America's communications with the Federal Reserve Board and other officials regarding the provision of government aid in connection with the merger with Merrill.
Some lawmakers have said the Fed had kept other regulators in the dark about key issues surrounding the issue.
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