| |||||||||||||||||||||||||
| |||||||||||||||||||||||||
 Bank of America Corp. (NYSE:BAC) finally agreed to hand over documents disclosing the details about why it didn't inform shareholders about Merrill Lynch & Co.'s performance or bonuses prior to the acquisition, and that's likely to put several key dealmakers in the spotlight (and probably to the delight of several politicians). The bank's board voted to hand over the documents to the Securities and Exchange Commission and New York Attorney General Andrew Cuomo, who has been trying to get his hands on the details of the bonuses for months. BofA has hired Paul, Weiss, Rifkind, Wharton & Garrison LLP as counsel for litigation, and former CEO Ken Lewis hired his own counsel at Debevoise & Plimpton LLP. Read the full story in The Deal Pipeline (subscription required). The documents will reveal the nitty-gritty details surrounding several key BofA employees, as The Deal Professor writes, including: Tim Mayopoulos. Mr. Mayopolous was general counsel of Bank of America. He was fired on Dec. 10, 2008, less than two weeks after Bank of America's shareholders approved the Merrill acquisition. The firing of Mr. Mayopolous seems particularly abrupt. It is rather odd to fire your general counsel in the midst of a corporate acquisition. Amy Woods Brinkley. Ms. Brinkley was chief risk officer and Mr. Mayopolous reported to her. She, in fact, reportedly fired him. Ms. Brinkley "retired" from Bank of America on June 30. David Onorato. Mr. Onorato was chief of litigation and securities inquiries at Bank of America. He was also fired on Dec. 10, 2008. Helga Houston. Ms. Houston was compliance and risk management executive for the consumer bank. She was also fired on Dec. 10, 2008. Rosemary Berkery. Ms. Berkery was general counsel of Merrill Lynch. She departed Merrill in January.The documents are also likely to delve into the roles of both Brian Moynihan, the head of consumer and small-business banking, who was general counsel during the Merrill deal, and chief risk officer Greg Curl, who was the key dealmaker behind the Merrill deal. The two are being considered by the board for the chief executive position at Bank of America. Shareholder Jonathan Finger of Finger Interests Number One Ltd. told The Deal that he believes the two are not good candidates for CEO due to their involvement in the acquisition of Merrill. "Our preference is outside of the company," Finger said over the phone (see his preferences). "There are doubts with those two candidates because of the investigations surrounding the acquisition." David Marcus' The Deal magazine feature, Faceoff, explains that the case raises questions and reveals flaws in regulatory responses. How closely did disclosure in the case follow accepted practices? To the extent it didn't, did the divergence stem from calculated decisions at BofA or the government, from a failure to fully grasp the deal's political nature, or even from sloppy drafting? Why is the SEC settling the case rather than litigating it? And is Rakoff courageously challenging dubious, if long-accepted, practices or self-indulgently second-guessing from the comfort of his chambers? As he ultimately contends, it is likely to set a precedent. - Maria Woehr Follow me on Twitter @newsgirlmw
CategoriesComments
From: Matt Lechner,
.... and we would add one more point, on a particularly troubling aspect of this matter By over-riding the rights of the parties to settle, and rejecting the settlement as "too low" the judge has in effect convicted the defendant without taking the trouble to have a trial. That is not good. It is a plain and unvarnished fact that many companies, both financial and non-financial, avoid doing business in New York State because the courts have a tendency to do bizarre and improper things. Many judges strongly dislike people and companies in the financial sector. It is not illegal for them to dislike financial people and financial firms. However - convicting someone or some firm without a trial, which is in effect what the judge has done - that is very wrong, and very bad precedent. How does the system self-correct for that ? In plain fact, judges are above the law, and they know it and indulge themselves in abuse of people and firms who they "do not like". As a rough guess, this "incident", i.e. moving New York a couple of more notches toward potentially becoming not such a great place for a financial firm to do business, may cost the State of New York, and the City of New York 20-30,000 jobs. That is likely a reasonable guess how the market will tax this particular incident of judicial misconduct.
Posted on:
October 13, 2009 3:26 PM
 Deal Video
    Community
 Elsewhere on The Deal.comDealwatchThe Deal MagazineCorporate Dealmaker
The Deal VideoCategories
Blog roll
Archives
| |||||||||||||||||||||||||
|
|
|
|
|
As we have previous stated, we urge the parties (1-the bank, 2-the regulators, and 3-the court), to bring this matter to a speedy and proper conclusion.
Many matters in finance involve competing interests, and in situations of large-scale institutional distress; there are mis-steps and compromises. Going through the situation with a fine-tooth comb now will likely lead to problems, and to what benefit. The bank had to be rescued, Merrill had to be rescued, and it had to be done quickly. Given that scenario - B of A management did a reasonably good job.
That notwithstanding, the lapses were serious, as the judge pointed out - and should not be trivialized with a settlement amount that represents a very small sum to the bank. That sends the wrong message, and is fundamentally wrong. The regulators obviously have a concern, the court felt the fine was too light. Let the matter be resolved with a bigger fine, and have one of America's biggest financial institutions set its sights on the future, not dwell on the past.
The lapses were apparently motivated by management's goal of having the bank complete what it needed to complete to prevent its failure, and the failure of Merrill Lynch. The lapses were apparently not motivated by improper desires for illicit gains. Moreover - in hindsight, all of the parties benefited, quite substantially.
This matter is now transcending into a zone of bad precedent. It is bad precedent for a judge to reject a settlement which has been approved by the SEC, largely because it is being prosecuted as a civil matter which the parties have a right to settle. And yet, it is bad precedent and counter to the public good for the SEC to agree to "de minimus" fines on serious matters. It is also bad precedent for regulators to force a corporate board to disclose it's external legal memoranda. If there was evidence of a crime, that might be different - however, there apparently is none, and clearly the bank was cooperating with the Federal Reserve and the U.S. Treasury during a time of true global emergency.
Therefore, once again - we urge the parties to bring this matter to a conclusion, before the ego's of those involved force the matter into more unforeseen legal contortions, which have the potential to undermine the strength and leadership of the American financial system.
Matt Lechner - CFP, CRPS, FRM
Chairman - WSSIG, the Wall Street Special Interest Group