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New York’s attorney general has subpoenaed five Bank of America directors as part of an investigation into the Merrill Lynch acquisition. (Mark Lennihan/Associated Press) |
Is bank chief’s retiring forced?
NY and federal probes continue
Ken Lewis’s explanation that he will retire soon from Bank of America Corp. on his own terms continued to be met with skepticism yesterday. Meanwhile, government investigators vowed to keep investigating the company’s controversial acquisition of Merrill Lynch.
Lewis’s announcement that he will step down as chief executive at the end of this year was notable for several reasons: He had given no inkling of plans to leave so soon; it came just before New York investigators are expected to bring fraud charges against top bank officials over the Merrill deal; and perhaps most striking, there was no successor in sight, or even a process to choose one.
Peter S. Cohan, a Marlborough management consultant who teaches at Babson College, said it is unusual for a chief executive to resign without lining up a successor first.
“It’s a sign of a forced exit,’’ Cohan said. “You don’t leave the CEO slot so quickly without having a nice smooth succession plan in place, unless there is a reason.’’
Bank of America is under investigation in New York and Washington over whether it misled shareholders about the size of the troubled investment bank’s losses or hid Merrill’s plans to pay $5.8 billion in bonuses before the deal was completed.
Lewis, 62, denied he was forced out.
“Some will suggest that I am leaving under pressure or because of questions regarding the Merrill deal,’’ Lewis told bank employees in an e-mail message late Wednesday. “I will simply say that this was my decision, and mine alone.’’
Lewis argued that he had achieved his major goals as CEO and that the bank was on track to overcome its challenges, with a seasoned team of executives in place.
Several Bank of America officials backed him up.
“There was zero pressure from the board,’’ Charles K. Gifford, a Bank of America director and longtime Boston banker, said Wednesday.
And Robert Stickler, a Bank of America spokesman, said board members asked Lewis to stay.
Either way, his announcement should not have been a surprise, given how much controversy and criticism Lewis was subjected to in the past year, said Tom Hazen, a professor at the University of North Carolina in Chapel Hill who focuses on corporate and securities law.
“It is unusual for a company that is perceived as having problems for the CEO to last a terribly long time,’’ he said.
Hazen noted that, in addition to the government investigations, the company’s stock has slumped recently and it lost a number of directors and key executives, who resigned in recent months.
Todd Hagerman, a banking analyst for Collins Stewart, said Lewis’s pending retirement is “another steppingstone toward restoring credibility’’ for Bank of America’s board and strengthening the company’s leadership.
Bank of America shares fell 4.2 percent to $16.21 yesterday on the news, double the decline of the Dow Jones industrial average.
Bank of America has promised to name a successor by the time Lewis steps down at the end of the year.
New York’s attorney general, Andrew Cuomo, has laid the groundwork for a potential civil fraud case against top Bank of America executives for allegedly misleading shareholders about the Merrill acquisition.
His office recently decided to subpoena all 15 people who served on the Bank of America board when the company approved the Merrill deal, to find out what they knew before the deal was approved.
Cuomo’s office said Lewis’s decision to retire “will have no impact’’ on its inquiry.
In addition, the Securities and Exchange Commission is pressing forward with its case against the company after a federal judge in September refused to approve a $33 million settlement agreement.
The SEC had accused Bank of America of failing to disclose the Merrill bonuses to shareholders. Bank of America has vowed to fight the accusations.
And US Representative Edolphus “Ed’’ Towns, a New York Democrat who leads the House Oversight and Government Reform Committee, said yesterday that his committee will continue to investigate whether there was any misconduct in the shotgun marriage between Bank of America and Merrill Lynch.
“We know there is something rotten in the cotton,’’ Towns said in an appearance on CNBC’s Squawk Box program yesterday.
“We can’t stop because they are changing leadership. . . . We are not looking at investigating one man; we are looking at the deal.’’
Todd Wallack can be reached at twallack@globe.com. 
© Copyright 2009 Globe Newspaper Company.
