October 13, 2009

BofA’s Elusive Walk-Away Number: The Case for Better Disclosure

In his “Proxy Disclosure” Blog, Mark Borges has already blogged three times about the challenges of determining how much money recently “resigned” CEO Ken Lewis will walk away with from Bank of America. As Marked noted in his first blog: “All it took was one hour, two college degrees, and over 20 years’ experience in the executive compensation area to come up with this “ball park” figure. Does anyone still think that we don’t need a “walk-away” number as part of the executive compensation disclosure?”

We have been touting the need for better transparency in the severance and change-in-control contexts for quite some time – pushing the need for companies to disclose their “walk-away numbers.” This is not even about responsible pay practices – this is squarely in the hands of lawyers who draft for a living. This is about better transparency. It’s time for you to make a difference.

Those of you attending our upcoming “4th Annual Proxy Disclosure Conference” – either in San Francisco or by video webcast – will not only receive practical guidance about how to craft such a disclosure, you will also get a pro-forma example of what this looks like…register for the Conference now.

BofA Reverses Course: Waives Attorney-Client Privilege

It is widely reported that Bank of America’s board decided on Friday to reverse course and waive its attorney-client privilege so that the SEC, Andrew Cuomo and others will soon know the details regarding “who advised what” when it came to BofA deciding not to disclose the circumstances regarding bonuses paid to Merrill Lynch employees. According to this NY Times article:

The board reached a tipping point after bank executives held conversations over the last two weeks with the office of New York’s attorney general, said the people briefed on the matter. Mr. Cuomo’s office threatened to charge individual bank executives, including Mr. Lewis, with wrongdoing, these people said. The bank also faced a deadline this week to provide a log of its private legal documents to a House committee.

The bank notified Mr. Cuomo’s office of its decision on Monday, and will do the same in a separate case pending against it by the Securities and Exchange Commission. The bank will also provide documents to investigators in Congress, Ohio and North Carolina, where the bank is headquartered.

SEC (and BofA) Requests a Jury Trial: Is That Normal?

Last week, both the SEC and Bank of America filed a notice in the US District Court-SDNY seeking a jury trial. I searched the SEC website and confirmed my hunch that it is not at all uncommon for the SEC to ask for a jury trial, particularly when the circumstances indicate that their action will be contested. There looked to be at least a dozen complaints filed already in 2009 with demands for jury trials.

Bear in mind that most cases are filed as settled cases, so there would never by a jury trial demand in any of those. For example, in this case, the SEC didn’t initially file a demand for a jury trial because BofA settled (and then Judge Rakoff didn’t accept the settlement).

Ohio Attorney General Files Class Action Lawsuit against Bank of America

It’s not just New York Attorney General Andrew Cuomo and the SEC going after BofA (and a horde of private plaintiffs; this Bloomberg article notes Delaware VC Strine refused to dismiss a case against BofA yesterday). On September 28th, the Washington Post article noted the Ohio Attorney General has filed a class action lawsuit against Bank of America and its executives over the bank’s alleged failure to disclose losses and bonuses prior to its acquisition of Merrill Lynch. Here is the Ohio AG’s complaint – and press release.

On re:theauditor, Francine McKenna blogs about Deloitte’s exposure in these BofA cases, including a hearing being held today in one of them.

– Broc Romanek