U.S.

SECURITIES AND EXCHANGE COMMISSION

Litigation Release No. 21407 / February 4, 2010
Securities and Exchange Commission v. Bank of America
Corporation, Civil Action Nos. 09-6829, 10-0215 (S.D.N.Y)
Bank Of America Agrees to Pay $150 Million to Settle SEC Charges

The Securities and Exchange Commission today filed a motion seeking court approval of a
proposed settlement whereby Bank of America will pay $150 million and strengthen its
corporate governance and disclosure practices to settle SEC charges that the company failed to
properly disclose employee bonuses and financial losses at Merrill Lynch before shareholders
approved the merger of the companies in December 2008.

The SEC previously filed two sets of charges in the U.S. District Court for the Southern District
of New York alleging Bank of America failed to disclose material information to shareholders
prior to their vote to approve the merger with Merrill Lynch.  In the first enforcement action on
Aug. 3, 2009, the Commission charged Bank of America with failing to disclose, in proxy
materials soliciting shareholder votes for approval of the merger, its prior agreement authorizing
Merrill to pay year-end bonuses of up to $5.8 billion to its employees prior to the closing of the
merger.  In the second enforcement action on Jan. 12, 2010, the Commission charged Bank of
America with failing to disclose the extraordinary losses that Merrill sustained in October and
November 2008.

Under the terms of the proposed settlement, which are subject to approval by the Honorable Jed
S. Rakoff, the $150 million penalty will be distributed to Bank of America shareholders harmed
by the Bank’s alleged disclosure violations.  The Commission will propose a distribution plan at
a later date. 

The proposed settlement requires Bank of America to implement and maintain seven remedial
undertakings for a period of three years:

 Retain an independent auditor to perform an audit of the Bank’s internal disclosure

controls, similar to an audit of financial reporting controls currently required by the
federal securities laws.
 Have its Chief Executive and Chief Financial Officers certify that they have reviewed all
annual and merger proxy statements.
 Retain disclosure counsel who will report to, and advise, the Board’s Audit Committee
on the Bank’s disclosures, including current and periodic filings and proxy statements.
 Adopt a “super-independence” standard for all members of the Board’s Compensation
Committee that prohibits them from accepting other compensation from the Bank.
 Maintain a consultant to the Compensation Committee that would also meet super-
independence criteria.
  Provide shareholders with an annual non-binding “say on pay” with respect to executive
compensation.
 Implement and maintain incentive compensation principles and procedures and
prominently publish them on Bank of America’s Web site.

The proposed settlement includes a Statement of Facts describing the details behind the
allegations in the actions based on the discovery record.    

The SEC is grateful for the support and cooperation of Attorney General Andrew Cuomo and the
Office of the New York State Attorney General.  The SEC also thanks Attorney General Roy
Cooper, Attorney General of the State of North Carolina, and his staff for their collaboration on
the terms of the proposed settlement.  The SEC acknowledges the assistance of the U.S.
Attorney’s offices for the Southern District of New York and Western District of North Carolina,
the Federal Bureau of Investigation, and the Office of The Special Inspector General for the
Troubled Asset Relief Program in the investigation leading to the actions.

U.S. SECURITIES AND EXCHANGE COMMISSION

Litigation Release No. 21384 / January 20, 2010
Accounting and Auditing Enforcement Release No. 3108 / January 20, 2010
Securities and Exchange Commission v. General Re Corporation, Civil Action
No. 10 Civ 458 (S.D.N.Y.)
SEC Charges General Re Corporation for Role in AIG and Prudential Accounting
Frauds
The Securities and Exchange Commission today charged General Re Corporation for its
involvement in separate schemes by American International Group and Prudential
Financial, Inc. to manipulate and falsify their reported financial results.
The complaint alleges that a foreign subsidiary of Gen Re entered into two sham
“reinsurance” transactions with AIG in 2000 to improperly allow AIG to reverse the
declining reserve trend and falsely report additions to both loss reserves and premiums
written. Senior officials at Gen Re helped AIG structure the two sham transactions. The
contracts show reinsurance transactions that appeared to transfer risk to AIG, but the
transactions did not transfer risk.
The complaint further alleges that Gen Re separately entered into a series of sham
reinsurance contracts with Prudential’s property and casualty division from 1997 to
2002. The contracts had no economic substance and purpose other than to allow
Prudential to build up and then draw down on an off-balance sheet asset or “finite
bank” parked with Gen Re. As a result of the sham transactions, Prudential improperly
recognized more than $200 million in revenues in 2000, 2001, and 2002. Gen Re
received fees totaling $8.1 million for structuring and executing the scheme with
Prudential.
Without admitting or denying the allegations in the complaint, Gen Re has consented to
a judgment enjoining it from aiding and abetting violations of Sections 13(b)(2)(A) and
13(b)(2)(B) of the Securities Exchange Act of 1934 and directing it to pay $12.2 million
in disgorgement and prejudgment interest. The settlement is subject to court approval.
In determining to accept Gen Re’s settlement offer, the SEC took Gen Re’s remediation
efforts and cooperation into account. Among the efforts SEC considered: Gen Re’s
comprehensive, independent review of its operations conducted at the outset of the
government’s investigations the results of which were shared with investigators; Gen
Re’s substantial assistance in the government’s successful civil and criminal actions
against individuals involved in the scheme with AIG; and Gen Re’s internal corporate
reforms designed to strengthen oversight of its operations. Those reforms entail
dissolving a subsidiary involved with the AIG transactions, appointing an independent
director to its Board of Directors, forming a committee consisting of senior managers to
review and approve complex transactions, requiring legal review of proposed finite or
loss mitigation contracts, and fortifying its internal audit functions and underwriting
rules.
The SEC previously charged AIG with securities fraud and improper accounting, and the
company settled the charges by paying more than $800 million among other remedies.
The SEC also previously charged AIG former chairman Maurice R. “Hank” Greenberg
and former chief financial officer Howard I. Smith, as well as former senior executives of
Gen Re for their roles in connection with the scheme with AIG. The Commission
separately charged Prudential with securities laws violations in 2008.