For once, Bank of America (NYSE: BAC ) shareholders are getting some justice, and those singlehandedly responsible for transforming the bank from a world-class enterprise into a taxpayer-sucking ward are being held accountable.
Yesterday, Federal District Judge Jed Rakoff rejected a $33 million settlement offer that the SEC recommended to settle allegations that the bank misled shareholders. The bank is accused of suggesting that it would refrain from paying bonuses to Merrill Lynch executives last year when, in fact, it authorized $5.8 billion in bonuses and paid out $3.6 billion.
Saying the bank "materially lied" to shareholders, Rakoff rejected the settlement offer because "it proposes that the shareholders who were the victims of the bank's alleged misconduct now pay the penalty for that misconduct."
Meanwhile, New York Attorney General Andrew Cuomo announced that he may seek civil fraud charges against B of A executives, possibly including CEO Ken Lewis and CFO Joe Price. Although it doesn't look as though he's been named, I'd expect former Merrill Lynch CEO John Thain to eventually be thrown into the mix as well.
Most of this will come off as old, tired news to B of A shareholders. But it raises the question: What do shareholders still see in Ken Lewis? How much more of this will they put up with? While the CEOs of JPMorgan Chase (NYSE: JPM ) , Goldman Sachs (NYSE: GS ) , and Wells Fargo (NYSE: WFC ) are busy scouting out new opportunities and being hailed as the smart ones who made it through, Lewis is being accused by a judge of lying to shareholders, was recently ousted as chairman, and is still slogging through class action lawsuits. That's unnecessarily time-consuming at best, and it's more likely a sign that he should have been shown the door awhile ago.
What is it going to take for shareholders to finally say "enough" and vote Lewis out of office? He nearly obliterated shareholder value with the Merrill acquisition (regardless of where you stand on the "he was forced to buy it" issue, the irresponsibility of a $50 billion deal being thrown together in 24 hours was Lewis' doing), was then saved by taxpayer support, and is now being accused of lying in the acquisition's aftermath. How many signs do shareholders need that someone else might be more fit for the job?
Or better yet, I'll pose the question another way: What do you, as B of A shareholders, still see in Ken Lewis? Why, if at all, do you think he's still the guy for the job? Let me know in the comment section below.
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