Aug. 3 (Bloomberg) -- Bank of America Corp. paid $33 million to settle U.S. regulatory claims that it misled investors about bonus payments while buying Merrill Lynch & Co.

Bank of America said in a November joint proxy statement for the acquisition that Merrill had agreed not to pay year-end performance bonuses or other incentive pay to executives before the closing without Bank of America’s consent, the Securities and Exchange Commission’s said in a complaint filed today in federal court in New York.

Instead, “Bank of America had agreed that Merrill could pay up to $5.8 billion -- nearly 12 percent of the total consideration to be exchanged in the merger -- in discretionary year-end and other bonuses to Merrill executives for 2008,” the SEC said in the complaint.

Separately, Bank of America said today that it hired former Citigroup Inc. executive Sallie Krawcheck to head wealth management and promoting Thomas Montag to head global corporate and investment banking. Brian Moynihan will head consumer banking, replacing Liam McGee, who is leaving the bank.

Bank of America’s acquisition of Merrill Lynch in January led shareholders to oust Chief Executive Officer Kenneth Lewis as chairman and sparked a congressional inquiry. Much of the debate has focused on whether the bank, under government pressure to complete the deal, withheld information from shareholders about potential losses.

The settlement, announced by the SEC today, “represents a constructive conclusion to this issue,” said company spokesman Scott Silvestri. “This is an important step forward for Bank of America and allows us to focus our energies on enhancing stockholder value by continuing to execute our strategies for the long-term success of our business.

‘False, Misleading’

The omission on bonuses was “materially false and misleading” because of their size, the SEC said. The company didn’t admit or deny the claims while agreeing to settle.

“Merrill looks like they threw caution to the wind and went crazy on these bonuses,” said Bill Brown, a visiting professor at Duke University Law School who formerly worked as a lawyer at Morgan Stanley.

“It’s becoming harder and harder for someone like Lewis to hold on,” Brown said, referring to CEO Lewis. “What’s happening here is that the vultures are circling and there are a lot of vultures.”

Bank of America rose 59 cents to $15.38 at 1:25 p.m. in New York Stock Exchange composite trading.

Accelerated Bonuses

“Merrill wound up paying $3.6 billion in bonuses to its executives despite the fact that Merrill ultimately lost $27.6 billion in 2008, a record loss for the firm and nearly $20 billion more than the $7.8 billion it had lost in 2007,” the SEC wrote in the complaint.

In prior years, Merrill made final decisions on its bonus pool in January for the year the bonuses were paid, according to the complaint. Last year, it accelerated the bonuses, with its compensation committee approving the schedule on Nov. 11 that would pay cash awards on Dec. 31 and stock awards in “early 2009,” according to the complaint.

Bank of America acquired Merrill on Jan. 1 for $33 billion. It was announced at $50 billion but fell because of plunging share price.

The case is Securities and Exchange Commission v. Bank of America Corp., 09-cv-6829, U.S. District Court, Southern District of New York (Manhattan).

To contact the reporters on this story: Thom Weidlich in New York at tweidlich@bloomberg.net; David Scheer in New York at dscheer@bloomberg.net.

Last Updated: August 3, 2009 13:55 EDT