B of A's CEO sells his Porsche to CFO: Scandal or distraction?
Investigations into corporate scandals often start as genuine inquiries into a company's actions but end up becoming media circuses. That has finally happened at Bank of America (BAC). The judgment of Ken Lewis, the bank's CEO, has been questioned with regards to buying loss-plagued Merrill Lynch. There is the matter of whether bonuses at Merrill were too large and whether Bank of America senior management knew about them and let them go. Then, there is the question of whether Lewis should have disclosed pressure from Secretary Henry Paulson to close the Merrill Lynch deal in late 2008.
The latest piece of news about Lewis is that he sold his Porsche to his CFO in 2007. According to BizJournal, "Until now, the transfer of the car's ownership involving the two Bank of America executives has never been publicly disclosed. And while terms of the transfer remain private, corporate governance experts say the deal raises questions about ethics and independence."
Is that important? In a very minor way, yes. The nature of the transaction should probably have been disclosed earlier. It may be a sign that a boss and his subordinate are too close.
But, what it is, above all else, is a distraction. There are so many legitimate issues about problems at Bank of America that raising this one, which will certainly fascinate the media and make for good headlines, will take away the focus from the questions of whether the bank can make it without tens of billions of new dollars invested, and whether the right people are running the company.
Douglas A. McIntyre is an editor at 24/7 Wall St.