The inestimable Gretchen Morgenstern unearths yet another example of corporate crime, soon to disappear, unpunished, into the infinite number of memory holes at the Justice Department and the SEC:
Days before Bank of America shareholders approved the bank’s $50 billion purchase of Merrill Lynch in December 2008, top bank executives were advised that losses at the investment firm would most likely hammer the combined companies’ earnings in the years to come. But shareholders were not told about the looming losses, which would prompt a second taxpayer bailout of $20 billion, leaving them instead to rely on rosier projections from the bank that the deal would make money relatively soon after it was completed.
What Bank of America’s top executives, including its chief executive then, Kenneth D. Lewis, knew about Merrill’s vast mortgage losses and when they knew it emerged in court documents filed Sunday evening in a shareholder lawsuit being heard in Federal District Court in Manhattan.
(via New York Times)
It is becoming increasingly difficult for the bankers to maintain the fiction that their job is to enhance shareholder value. That, after all, is the excuse they often use to justify socially destructive actions. It is, we are often told, not their job to do what’s right for the community, state, nation or world, but only to maximize shareholder return. In fact, their job is to maximize their own incomes, shareholders and society alike be damned. The one responsibility they take to heart is the obligation they owe each other, to make sure that no executive goes unpaid or unbonused.
As a lawyer, I particularly enjoyed this:
Bank of America officials declined to comment. Andrew J. Ceresney, a lawyer for Mr. Lewis, also declined to comment on the filing, but he referred to a motion filed on behalf of Mr. Lewis on Sunday contending that the former chief executive did not disclose the losses because he had been advised by the bank’s law firm, Wachtell, Lipton, Rosen & Katz, and by other bank executives that it was not necessary.
I never knew that as a lawyer I could pre-absolve my client’s transgressions. I mean, even priests can only forgive your sins after you commit them. If a client wants to, lets say, fail to give required disclosures about the condition of a home before sale, all he need do is ask me if he has to. I tell him he doesn’t, and boom, no need to tell the buyer that the furnace doesn’t work and the basement floods. Of course, I’m exempt from liability because all I did was give advice; it wasn’t my duty to disclose. But Lewis is going this example one better, because he’s saying his illegal activities were okay because they were also sanctioned by his co-conspirators. Only a banker would make that argument; and only a banker would be likely to get away with it.
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