Bank of America under attack from investors
In September, when BOA announced that it was acquiring Merrill Lynch, it seemed as if the Charlotte-based bank might have been getting a great deal at fire-sale prices. In the ensuing months, however, Merrill's toxic assets have dragged both banks down, former Merrill CEO John Thain has fomented executive compensation scandals, and BOA has had to repeatedly borrow from the federal government. To put it mildly, the deal has started to look threadbare.
For the past two months, BOA shareholder Jerry Finger has been leading the charge against Kenneth Lewis, alleging that the bank took on too much risk in its acquisition of Merrill Lynch. The decision, which BOA made in September after only 48 hours of talks, resulted in the creation of the world's largest bank by assets. However, Merrill's troubled assets caused it to lose $15.84 billion in the fourth quarter, forcing BOA to borrow $20 billion from the federal government and requiring a loss-sharing agreement on $118 billion in troubled assets.
Finger notes that the merger has undermined the value of BOA's stock. Currently, the bank's stock is 77 percent below its price on September 15, the day the merger was announced. Finger's firm, Finger Interests Number One Ltd, owns 1.1 million shares of BOA, or about .02 percent of its shares outstanding. He gained this stake in 1996 when Charter Bancshares Inc, which he ran, was acquired by NationsBank. NationsBank, in turn, became part of BOA.
Finger specifically alleges that BOA displayed "a total disregard" for its shareholders, and was focused on "increasing size, market share, and geographic footprint."
In addition to campaigning against Lewis, Finger is also encouraging shareholders to vote against O. Temple Sloane, Jr., the chairman of the bank's board of directors, and Jackie Ward, who also sits on the board.
Finger is joined by another shareholder, the Change to Win Investment Group, which has been baying for Lewis' blood over the Merrill deal.
In late January, Finger filed a class action lawsuit against BOA in New York Federal Court, claiming that Lewis, Thain, and others failed to protect shareholder interests. On Monday, two of the country's largest pension funds, the California Public Employees' Retirement System (CalPERS) and the California State Teachers' Retirement System (CalSTRS), followed suit, filing a joint motion to be designated as lead plaintiff in a class action suit against BOA. They claim that the bank "misstated or omitted" important information about the Merrill merger.
With lawsuits pending and attacks against prominent company officers, it will be interesting to see what else comes up as the April meeting draws nearer.