Judge Jed Rakoff has again rejected the SEC's $33 million settlement with Bank of America as wholly inadequate--to the applause of some. He has set a Feb.1 trial, directing both sides to begin preparing. What an odd trial it would be.   

Both sides, of course, wanted to end the matter, but the judge just wasn't buying the whole premise of it. He suggests that it was a mere "contrivance" allowing both sides to win in the PR battles. The SEC gets to chalk up a much-needed victory. Bank of America gets to 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, says Reuters.

If the company really lied to shareholders, why should they, the victims, be forced to cough up $33 million, Rakoff wonders. He called it "absurd" and "not only unfair but unreasonable." He also wonders why the bank would be willing to pay $33 million if they were truly innocent; he doesn't buy that fighting would be more expensive. 

The New York Times notes that this is not the first time Judge Rakoff has refused to accept a settlement. In 2003, he rejected an SEC settlement with WorldCom, which collapsed in an $11 billion accounting fraud. Shareholders are foremost in his mind again. "When the judge forced the S.E.C. to increase the $500 million fine it was levying against WorldCom to $750 million, he also demanded that the money be paid out to the company's shareholders, rather than to the agency." 

For whatever reason, he taking a different tack now, essentially ordering a trial to get to the truth of what really happened and who's really to blame. No weaseling out. I suspect one or both sides will appeal. Or they just might approach the judge with a modified settlement. You get the feeling that the judge wants Bank of America personal accountability and at least an admission of guilt. Of course that might open the floodgates to civil litigation. 

At the same time, Andrew Cuomo is keeping the pressure on. 

You gotta love the judge's quote at the end of his opinion, a cynic is someone "who knows the price of everything and the value of nothing." - Jim