A federal judge expressed skepticism about the U.S. Securities and Exchange Commission's $150-million settlement with Bank of America Corp over the Merrill Lynch takeover, questioning whether the regulator was too tame in setting forth facts to help him decide.

U.S. District Judge Jed Rakoff is considering whether to approve the accord, which would resolve two lawsuits by the SEC against the largest U.S. bank over the January 1, 2009 merger.

The hearing came four days after New York Attorney General Andrew Cuomo filed civil fraud charges against the bank, former Chief Executive Kenneth Lewis, and consumer and small business and card banking chief Joe Price over the takeover. Price was chief financial officer at the time of the merger.

Cuomo alleged that the defendants misled shareholders about Merrill's soaring losses ahead of a December 5, 2008 shareholder vote on the merger, and also misled the federal government so that it could extract $20 billion of federal bailout money.

In a Monday hearing, Rakoff said the versions of facts set forth by the SEC and by Cuomo were strikingly different.

He said he plans to further review the circumstances under which general counsel Timothy Mayopoulos left Bank of America, as well as the role of the bank's law firm Wachtell Lipton Rosen & Katz LLP in deciding what to tell shareholders.

Rakoff also said he had some questions about the monetary component of the settlement, while other portions to improve the bank's corporate governance and disclosure practices appeared quite positive.

The dispute has already been embarrassing for the SEC and the Charlotte, North Carolina-based bank.

Rakoff had in September rejected a $33 million accord as too low, as unfair in that it would have forced shareholders to pay a fine, and defective because it failed to hold any individual executives, directors and lawyers responsible.

MAYOPOULOS ROLE

In its lawsuits, the SEC accused the bank of hiding Merrill's mounting fourth-quarter 2008 losses, and misleading shareholders about the $3.6 billion of bonuses it let Merrill pay in 2008. The quarterly loss would total $15.8 billion.

Cuomo last week alleged that Bank of America fired Mayopoulos on December 10, 2008 after he had been misled about the scope of Merrill's losses, and had confronted Price following the shareholder vote about those losses.

But at Monday's hearing, George Canellos, regional director of the SEC's regional office, suggested that the replacement of Mayopoulos as general counsel with Brian Moynihan may have been motivated by a desire to keep Moynihan from leaving, rather than be replaced by Merrill's chief executive, John Thain.

Saying that a press release was being prepared to announce Moynihan's departure, Canellos said there was a bit of a fire drill at Bank of America to keep that from happening.

Moynihan replaced Lewis last month as chief executive.

The governance and disclosure changes in the settlement would include giving shareholders a voice on executive pay, and posting incentive pay practices in a prominent place on the bank's website, among other things.

Bank of America shares fell 45 cents, or 3 percent, to $14.55 in afternoon trading on the New York Stock Exchange. They traded at $33.74 before the Merrill merger was announced on September 15, 2008.

The federal cases are SEC v. Bank of America Corp, U.S. District Court, Southern District of New York, Nos, 09-06829 and 10-00215. Cuomo's case is New York v. Bank of America Corp et al, New York State Supreme Court, New York County, No. 450115/2010.

(Reporting by Jonathan Stempel; Editing by Tim Dobbyn)

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