What did he know? When did he know it? And why was he fired? Those are the questions U.S. District Judge Jed S. Rakoff will ponder regarding the circumstances surrounding the firing of former Bank of America (BAC) general counsel Timothy Mayopoulos.
At stake is a settlement to resolve two lawsuits by the SEC. The first is over Bank of America’s disclosures regarding billions of dollars in bonuses paid to Merrill Lynch employees shortly before the $50 billion merger closed in January 2009. The second has to do with the bank’s alleged failure to disclose mounting losses at Merrill before a 2008 shareholder vote.
It is the extent of losses at Merrill Lynch that is at the center of the competing court filings.
In his lawsuit, Mr. Cuomo implies that Mr. Mayopoulos was terminated because he wanted to disclose the widening losses at Merrill Lynch before Bank of America purchased the investment bank in December 2008.
The SEC filing, disputes Mr. Cuomo’s allegations and states that the firing of Mr. Mayopoulos had nothing to do with his opinion about ballooning losses at Merrill.
The filing by the SEC supports previous statements made by former CEO Kenneth D. Lewis. According to Lewis and other bank officials, Mr. Mayopoulos was fired to create an opening for Brian Moynihan, who became CEO for the bank in 2009, replacing Mr. Lewis. At the time, Mr. Moynihan was considering leaving the bank after rejecting an offer by Mr. Lewis to run the bank’s credit card division.
“Lewis’s account is corroborated by the testimony of several other senior officers and directors of Bank of America as well as contemporaneous emails and other communications,” the SEC said in its filing. “His account is not contradicted by any evidence.”
One thing is clear in both accounts. Bank executives were advised two days before a shareholder vote on the deal that losses at Merrill were growing.
What is less clear is what numbers were said, and to whom. Joseph Price, then chief financial officer, said he told Mr. Mayopoulos that the loss estimate was $9 billion. However, according to Mr. Cuomo’s lawsuit and Mr. Mayopolous’s testimony, the general counsel recalls being told the losses were close to $7 billion.
Mr. Mayopoulos claims that he learned of the $9 billion figure at a board meeting four days after the vote. After failing to get a meeting with Mr. Price to discuss whether to disclose the larger number with Mr. Price, Mr. Mayopolous was terminated the next day.
However, the SEC filing states, “There is no evidence that Joe Price, Bank of America’s then chief financial officer who had consulted Mayopoulos on disclosure in November and December, had any knowledge of, or participation in, the decision to terminate Mayopoulos.”
The ruling will essentially show which competing version of events is more credible to the New York judge.
Judge Rakoff has said he plans to issue a ruling on Monday.
