WASHINGTON (Legal Newsline) - U.S. Rep. Dennis Kucinich wants to know if Bank of America was in violation of a 1934 law by intentionally withholding the information regarding bonus payments made by a company it planned to purchase.
Kucinich wrote Securities and Exchange Commission Chairman Mary Schapiro Monday, asking her to determine if Bank of America broke the Securities Exchange Act of 1934. Kucinich, a Democrat from Ohio, is the chairman of the House Oversight and Government Reform panel's domestic policy subcommittee.
The letter cites information from a March 11 brief filed by New York Attorney General Andrew Cuomo. Cuomo alleged that Bank of America knew before its shareholders voted to purchase Merrill Lynch that the company planned to give out up to $5.8 billion in performance bonuses.
"There is no question that any reasonable BOA shareholder would have considered the Merrill bonuses to be material to their decision on whether to approve the merger," Kucinich's letter states.
"The federal securities laws were designed to protect shareholders against precisely such omissions of material information. It is the SEC's responsibility to investigate and prosecute such abuses. Therefore, I request that the SEC provide the Subcommittee with greater insight into its enforcement of the materiality standard as it applies to company disclosures to shareholders."
Kucinich asked for a reply by Friday. The bonuses totaled $3.6 billion to 696 employees.
Kucinich said his staff asked BOA about Cuomo's allegations, and the company replied, in part, "Bank of America disclosed everything it was required to disclose prior to the Dec. 5 shareholder vote on the merger. Bank of America did not disclose and was not required to disclose to its shareholders prior to Dec. 5, the details it then possessed about the potential size of the Merrill bonuses or the expected timing of their payment to Merrill's employees."
Kucinich said the response "raises significant questions about the SEC's interpretation of the fiduciary duty to disclose all 'material' information to shareholders when requesting shareholder action, and what constitutes 'material' information for proxy rules designed to protect investors under the Securities Exchange Act of 1934."
From Legal Newsline: Reach John O'Brien by e-mail at john@legalnewsline.com.
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