Why Isn’t This Extortion?
On Monday, Manhattan federal judge Jed Rakoff rejected a proposed $33 million settlement between the SEC and Bank of America, over the issue of whether BoA had lied to shareholders about bonuses paid to Merrill Lynch employees. Near the end of his ruling, Rakoff wrote: 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. This characterization also could be applied to the New York pay-to-play investigation, with Andrew Cuomo playing the role of Mary Shapiro.
