UPDATE 6-BofA-SEC bonus pact rejected; Cuomo eyes charges

* Cuomo preparing charges against bank executives - source

* Judge calls pact a contrivance, bank ready to litigate

* Bank of America shares rise 2 cents (Recasts paragraphs 1-4, 7; adds paragraph 9)

By Jonathan Stempel and Grant McCool

NEW YORK, Sept 14 (Reuters) - A federal judge rejected Bank of America Corp's (BAC.N) $33 million settlement with the U.S. Securities and Exchange Commission over Merrill Lynch & Co bonuses as a contrivance, and New York's top legal officer prepared to sue senior bank executives.

New York Attorney General Andrew Cuomo may file civil charges against some Bank of America executives, including "some of the very highest-ranking," over the companies' Jan. 1 merger, a person familiar with the probe said.

Chief Executive Kenneth Lewis and Chief Financial Officer Joseph Price could face civil fraud charges, the Wall Street Journal said, citing a person familiar with the probe.

A filing of charges would follow Monday's rejection by U.S. District Judge Jed Rakoff of the bank's settlement with the SEC, which he said "cannot remotely be called fair."

Unhappy that the bank did not and was not forced to reveal which executives or lawyers knew of the bonuses, Rakoff called the settlement "a contrivance designed to provide the SEC with the facade of enforcement and the management of the bank with a quick resolution of an embarrassing inquiry -- all at the expense of the sole alleged victims, the shareholders."

Rakoff ordered the bank and the SEC to prepare for a trial that would begin by next Feb. 1.

Cuomo had imposed a deadline of the end of Monday for Bank of America and Lewis to disclose more about the Merrill purchase. He is seeking more information about the bonuses and Merrill's $15.8 billion fourth-quarter loss, including who knew what prior to Dec. 5 shareholder votes to approve the merger.

"Individuals are at the heart of what the attorney general's investigation is looking at," according to the person familiar with the probe, who requested anonymity because the probe is ongoing.

Lewis was ousted as the bank's chairman in April, and the Merrill merger has led many analysts and investors to question his hold on the chief executive job. Bank of America shares are down by half since the merger was announced last Sept. 15.

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Rakoff faulted the SEC for accepting the bank's effort to invoke attorney-client privilege and avoid disclosing what executives and lawyers knew about its authorization for Merrill to pay up to $5.8 billion of bonuses, though it was clear the bank "blatantly" lied about the payouts.

The judge also questioned why shareholders victimized by the bank's management should be responsible for any fine, especially as the bank would not admit to wrongdoing.