Bank of America exec’s interesting settlement
As part of a $25 million settlement that Bank of America and their former CEO, Ken Lewis reached with the State of New York, Lewis agreed to a three-year ban from serving as an officer or director of any public company, according to Reuters.
Lewis led the company into acquisitions that hurt the industry, namely buying Countrywide from the Angelo Mozilo crew without proper due diligence, which led to huge lawsuits for illegal foreclosures (that BofA had to foot the bill for), and millions in losses on bad loans from a failing company.
Former Chief Financial Officer Joe Price has not yet reached a deal, but we anticipate a similar settlement will be reached in his case, as the NY Attorney General alleged that when Price and Lewis convinced shareholders that merging with a failing Merrill Lynch in 2008 was a good idea, BofA executives were fully aware that they would be acquiring a company facing over $9 billion in losses, which they never reported to the investors that approved the merger.
Price and Lewis also allegedly misled shareholders as to the negative impact that buying Merrill would have on the company’s future earnings.
Barely a quarter after the deal closed, BofA was sought out and was given billions of bailout dollars from the federal government, citing a “material adverse change” in Merrill’s financial condition over the previous three months.
The two executives and their team didn’t unveil Merrill’s massive losses until mid-January 2009, which sparked a $50 billion sell-off in BofA shares.
Finally, some accountability?
As part of the agreement, Lewis has agreed to pay a $10 million penalty to the state of New York and Bank of America will pay a $15 million penalty.
Policymakers and voters on both sides of the aisles have long been crying out for executives to be penalized, not just the corporations with deep pockets, and this marks a change in the tide. This settlement won’t hurt Lewis who is still extremely wealthy, and it won’t hurt Bank of America who is getting used to doling out billions in settlement funds, but it will send the message that executives may finally have their feet held to the fire and be kept out of board rooms. At least until this all blows over.