Press Release |
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Cummings Requests IG Investigation of SEC Fines Against TARP Recipients |
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| Washington, D.C. — Today, Congressman Elijah E. Cummings (D-Md.), a member of the House Committee on Oversight and Government Reform, sent the letter below to Neil Barofsky, the Special Inspector General for TARP, and David Kotz, the Inspector General for the SEC, regarding the $33 million in fines that Bank of America agreed to pay following an SEC enforcement action against the bank for making false and misleading statements to shareholders about the issuance of bonuses to Merrill Lynch executives during BofA’s acquisition of Merrill. Because American taxpayers have poured in $45 billion of assistance to Bank of America, Congressman Cummings is concerned that taxpayers will ultimately be the ones paying the fine.
Specifically, the Congressman is asking the Inspectors General to investigate the following issues when the SEC issues fines against TARP recipients:
Text of the letter:
August 6, 2009
The Honorable Neil M. Barofsky
Special Inspector General for the Troubled Assets Relief Program
1500 Pennsylvania Avenue, NW, Suite 1064
Washington, D.C. 20220 The Honorable H. David Kotz
Inspector General, U.S. Securities and Exchange Commission
100 F Street, NE
Washington, DC 20549-2736 Dear Inspectors General Barofsky and Kotz:
As you are aware, it was reported in the Wall Street Journal on August 3 that the Securities and Exchange Commission (“SEC”) brought an action against Bank of America for false and misleading statements, to which Bank of America agreed to pay $33 million in fines. The violations were related to misleading statements in proxies regarding the issuance of bonuses to executives of Merrill Lynch, which was in the process of being acquired by Bank of America.
Interestingly, The Washington Post ran a story on August 4 (“Dueling Public Interests In Policing Rescued Firms”) describing the questions that persist at the SEC regarding enforcement actions against firms that have received government financial assistance through the Troubled Assets Relief Program (“TARP”).
The articles described the following conflicts inherent in punishing firms for the violation of securities laws in order to protect shareholders:
(1) the enforcement action may harm the firm’s viability, and threaten systemic risk to the financial industry;
(2) the fines levied would essentially be paid with taxpayer funds;
(3) the fines would harm the shareholder investment in the firm, when the shareholder is the U.S. taxpayer; and
(4) the role played by Federal Reserve or Treasury officials in the actions upon which fines were issued may have been significant to the occurrence of the violation but cannot be investigated by the SEC.
As we continue to unravel the transactions and linkages that contributed to this recession, it is conceivable to expect that additional violations of securities laws will be revealed, and that those violations could have occurred at firms that have received government assistance.
Therefore, I respectfully request that your offices investigate the extent to which the enumerated scenarios above existed in the case of SEC v. Bank of America, as well as the potential for future instances of the above conflicts, given the current interaction between government and the private financial sector.
I appreciate the work your offices have done as our nation moves toward economic recovery, lending valuable insight and analysis to the Congressional oversight process.
Please do not hesitate to contact me or Martin Levine in my office at 202.225.4741 (or martin.levine@mail.house.gov) with any questions.
Sincerely,
Elijah E. Cummings
Member of Congress
Enclosure
Cc: The Honorable Rep. Edolphus Towns
The Honorable Rep. Darrell Issa
The Honorable Rep. Carolyn Maloney
The Honorable Sen. Sam Brownback
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