Expert witnesses for Bank of America Corp. cannot use media reports to boost claims at a civil trial that shareholders knew big bonus payments were looming when it bought Merrill Lynch & Co., a judge ruled Monday.
With his written decision, U.S. District Judge Jed S. Rakoff in Manhattan granted a request by the Securities and Exchange Commission that media reports cited by the bank's proposed experts be excluded from evidence at a trial scheduled to start March 1.
The SEC brought the civil case over billions in bonuses paid at Merrill Lynch after Bank of America bought the company in 2008. The main charge states the bank falsely implied to shareholders that Merrill was banned from paying year-end bonuses without the bank's approval.
Rakoff, noting that two of six experts Bank of America planned to call at trial relied heavily or exclusively on media reports for their determinations, said the relevance of media reports was eliminated by a proxy statement that told voting investors to disregard them.
The SEC claims that the proxy statement falsely represented that Merrill was prohibited from paying year-end bonuses without the banks' consent, even though the bank had already consented in writing to let Merrill pay up to $5.8 billion in bonuses.
The bank argued that widespread media reports made it clear that Merrill was expected to pay billions of dollars in year-end bonuses.
Rakoff said it "hints at hypocrisy" that the bank would argue that it can defend itself by claiming that shareholders would have disregarded its warnings not to rely on media reports and instead be aware from media reports that the bank's alleged lies did not matter.
Last year, Rakoff threw out the bank's $33 million settlement, renewing a path to trial.
Bank of America did not immediately return a call for comment.
Bank of America is one of the largest recipients of aid under the government's financial bailout program, getting $45 billion.