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"Bad Faith" Claims against Directors and Officers can be a factor which Courts will consider in approving, or rejecting a Settlement arranged by the same or other Directors and Officers, of Claims against the Corporation which will ultimately require the Shareholders to pay money:
An even more fundamental problem, however, is that a fine assessed against the Bank, taken by itself, penalizes the shareholders for what was, in effect if not in intent, a fraud by management on the shareholders. This was among the major reasons the Court rejected the earlier proposed settlement. [Citation omitted.] Where management deceives its own shareholders, a fine most directly serves its deterrent purposes if it is assessed against the persons responsible for the deception. If such persons acted out of negligence, rather than bad faith, that should be a mitigating factor, but not a reason to have the shareholder victims pay the fine instead.
Download Securities and Exchange Comm'n v. Bank of Am. (SDNY Case Nos. 09 Civ 6829 and 10 Civ 0215, Opinion Filed 02.22.10 Approving Settlement), attached Official Slipsheet Opinion at 11-12; also published as Securities & Exchange Comm'n v. Bank of Am. Corp., 2010 WL 624581 *5 (S.D.N.Y. February 22, 2010)(subscription required to access Westlaw). [Emphasis added.]
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