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August 26, 2009 11:22 AM

Rakoff Pokes Further at Attorney-Client Privilege in Bonus Case

Posted by Zach Lowe

On Tuesday, we interviewed several legal experts who were curious about how close Bank of America came to waiving attorney-client privilege in telling the Securities and Exchange Commission that bank executives relied purely on the advice of outside counsel in deciding to conceal information about Merrill Lynch bonus payments when BofA and Merrill merged. 

Judge Jed Rakoff of U.S. district court in Manhattan is apparently thinking along the same lines, according to our colleagues at The Am Law Litigation Daily. Rakoff is holding up a proposed $33 million settlement between BofA and the SEC over the disclosure (or nondisclosure, according to the SEC) of the bonus payments, and on Tuesday he flatly told the SEC that its explanation for the settlement is not satisfying. He requested further information from the agency about its dealings with BofA executives, the Lit Daily said. 

Rakoff is particularly interested in why the agency didn't push the bank further when executives said they relied completely on lawyers from Wachtell, Lipton, Rosen & Katz and Shearman & Sterling in crafting the merger agreement and the confidential documents outlining the bonuses. 

The Lit Daily pulled out this telling sentence from Rakoff's order for more information: "If the responsible officers from Bank of America, in sworn testimony to the SEC, all stated that 'they relied entirely on counsel,' this would seem to be either a flat waiver of privilege or, if the privilege is maintained, then entitled to no weight whatever, since the statement cannot be tested."

Experts speculated yesterday about whether Rakoff would push for a waiver of the privilege at some point. 

This obviously bears watching.

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