Congress zeroes in on Ken Lewis
Congressman Edolphus "Ed" Towns, chairman of the House Oversight Committee, comes from a world far away from the hustle and bustle of Wall Street. The New York Democrat represents a racially and economically diverse district in New York City's Brooklyn borough. An ordained Baptist minister, Towns preaches on Sundays.
Kenneth Lewis, chief executive at Bank of America Corp. (BAC), is a numbers guy. He began his career as a credit analyst before moving up the management ladder. He cobbled together a string of acquisitions culminating with last year's $50 billion deal to acquire Merrill Lynch. Lewis earned nearly $30 million in total compensation in 2007 and 2008. Earlier this year, Lewis was removed as chairman, and some shareholders who were angered by Bank of America's poor share performance had wanted him ousted as CEO as well.
Bank of America yesterday balked at a request from Towns' committee for documents related to the controversial Merrill takeover, including information on legal advice the company received about the payments of bonuses to Merrill employees. Towns was angry that Bank of America failed to meet his committee's deadline to turn over relevant documents.
"The taxpayers are now on the hook for billions of dollars and they have a right to know how that happened," Towns said in a press release.
Bank of America refused to provide Towns' committee with much of the information it wanted. The bank did provide "irrelevant" information, including numerous emails Lewis received from employees expressing admiration for his "awesome" performance on "60 Minutes" and an invitation to attend a conference on investment in East Asia, written in Chinese.
In an interview, Standard & Poors Equity analyst Stuart Plesser told DailyFinance that the legal issues surrounding Lewis are bound to be a distraction for Bank of America management. Lewis, though, remains an asset to the bank. "He's the guy you want at this juncture of the company's development," Plesser said. He rates Bank of America as a Hold.
The New York Democrat, however, remains undeterred. He is vowing to get the information he wants. Bank of America is sending executives to meet with Towns to try and work out a deal with him. The problem, though, is that the New York preacher has all of the resources of the government at its disposal.
Unfortunately for Bank of America shareholders, Lewis has angered many powerful people. New York Attorney General Andrew Cuomo is investigating the Merrill deal and has subpoenaed five Bank of America board members to testify. North Carolina Attorney General Roy Cooper also is investigating the Charlotte-based bank. The Wall Street Journal is reporting that the Bank of America board has been briefed on its options if Lewis is charged with fraud. The SEC also is investigating.
If Lewis survives any of this, it will be a testament to incompetent management or dumb luck.