The legal and business communities are still buzzing over U.S. District Judge Jed Rakoff’s scathing refusal earlier in the week to approve the proposed $33 million "settlement" (i.e., sweep under the rug) between the SEC and Bank of America over that the Bank’s failure (at least transparently) to disclose to its shareholders the billions in bonuses that the Bank agreed that an insolvent Merrill Lynch was allowed to pay to its employees.

The 12-page decision is certainly worth a read. Judge Rakoff tears into into the SEC for contradicting its own guidelines in penalizing BofA shareholders rather than the executives and lawyers who supposedly approved the lack of disclosure. The settlement "does not comport with the most elementary notions of justice and morality, in that it proposes that the shareholders who were the victims of the Bank’s alleged misconduct now pay the penalty for that misconduct." The Judge didn’t buy the SEC’s contention that this punishment will result in better management, characterizing it as "absurd." Sort of like the notion that the SEC can really police this type of thing in the first place.

Judge Rakoff goes on in his opinion to raise at least another half-dozen or so good questions about the proposed settlement. But there’s a couple more that I wish he’d asked.

A few years ago, former Enron chairman Ken Lay was prosecuted to death for promoting Enron to its shareholders even though he had a reasonable basis for believing that what he was saying about his company was true.

In contrast, the BofA executives and lawyers could not even offer the defense in a criminal fraud trial that the bad things they intentionally failed to tell BofA shareholders about the Merrill Lynch deal were immaterial.

So, isn’t it about time that somebody in the federal government acknowledge that it was a mistake to prosecute Ken Lay to death? And isn’t it about time that the government do something about this barbaric injustice?