by Deb Cupples | Some Bank of America shareholders are not too happy that CEO Kenneth Lewis helped push through the bank's acquisition of Merrill Lynch, because Merrill's fourth-quarter-2008 losses ended up being bigger than the pre-merger estimates.
Mr. Lewis seems to be saying that he is surprised about the magnitude of Merrill's actual losses. Frankly, I find that highly questionable. The New York Times reports:
"In mid-January, just hours after receiving a second round of government funding to cover heavy losses in its Merrill subsidiary, Mr. Lewis drew fire from investors more than a little curious to know why the bank didn’t alert them to the losses....
"The bank’s shareholders voted on the merger on Dec. 5. Mr. Lewis claims he found out about the losses later, but before the merger closed on Jan. 1.
"Others, however, say Mr. Thain gave his board estimates for the quarter on Dec. 8 and that those estimates were not nearly as bad as the final results, according to a person briefed on the discussions.
"While that certainly strengthens Mr. Lewis’s case that he did not know how bad Merrill’s quarter was before the shareholder vote, others say he still had time to warn them." (New York Times)
Mr. Lewis is not some rube who just rolled into town in the back of a cattle truck. I suspect that he had a stable of well-paid finance and accounting whizzes available to go over Merrill's books with a lice comb.
Before small-time players buy businesses -- even if they're committing a mere million dollars or less -- they tend to look at bank records and tax records and ledgers and records of all sorts.
Would Mr. Lewis have us believe that he (and the stable of whizzes) simply failed to act with due diligence before committing billions of shareholder (and taxpayer) dollars to buying Merrill Lynch?
Don't executives and Board members at public companies legally owe their shareholders the duty of care?
Perhaps the folks at Bank of America did analyze Merrill's books; perhaps the folks at Merrill gave them false information.
If that had happened, then one could argue that Merrill's folks duped Bank of America into the merger based on false premises -- in which case, I would imagine that some well-paid Wall Street lawyer should be able to undo the merger.
A savvy businessman named Jerry Finger (whose family and company own 1.5 million shares of Bank of America) is involved in a lawsuit against the bank's and Merrill's executives and Board members. Mr. Singer commented:
Memeorandum has commentary.
Other Buck Naked Politics Posts:
* Real Bonuses Based on Fake Profits
* Save Jobs by Cutting Executive Pay
* Execs Made Millions While Driving Companies into Ditch
* Krugman on the "Voodoo" Bank Bailouts
* GAO: Bailed-out Companies have Offshore Tax Havens
* Are Bailout Funds Being Misused?
* Cleaning up Political & Corporate Culture Could Help Economy
* Merrill CEO Shamelessly Spent Millions of Shareholder Dollars
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