The Ticker: Anne Applebaum chronicles the Ukraine's democratic removal of democracy
The Atlantic 50
The Most Influential Opinion makers

Most Clicked

1 Transcript Breakdown: Sarah Palin Backs Limbaugh's Use of Word 'Retards' Benjamin F. Carlson, The Atlantic Wire
2 The Political Fallout of John Murtha's Death Benjamin F. Carlson, The Atlantic Wire
3 The New Yorker Discovers Twitter, Scoffs Max Fisher, The Atlantic Wire
4 Tea Party's True Character Revealed at Convention Max Fisher, The Atlantic Wire
5 Can Obama's Bipartisan Summit Save Health Care? Max Fisher, The Atlantic Wire

Bank of America Exposes Records, to Warnings of Legal Chaos

Shortly after CEO and chief whipping boy Ken Lewis announced his departure from Bank of America (which the Wire covered here and here), the nation's largest retail bank has agreed to open up long-sought of legal advice. This decision, a surprising breach of attorney-client privilege, may allow the company to settle lawsuits revolving around the decision not to inform shareholders about a $5.8 billion bonus payout.

What will be revealed? Many legal analysts are focusing on what this means for Bank of America's law firm, which played a key role in guiding the company's conduct during the December merger.
  • A Legal Nightmare, says financial analyst Douglas McIntyre at Daily Finance. "The risk of the bank's new plan is two-fold. The first is that the documents will show that the legal advice given to the board was not taken, and that the bank went ahead with a proxy that was misleading about the details of the Merrill transaction. The proxy almost certainly obscured certain information about Merrill bonuses and when they were approved. The second risk is that U.S. District Judge Jed Rakoff will not consider the document disclosure adequate as the grounds for a settlement with the SEC and will force a trial."
  • An Embarrasment for the Lawyers, writes a structured finance lawyer who blogs at Economics of Contempt. He analyzes the difficult position this information imposes on Ed Herlihy, Bank of America's lead counsel during the negotiations. "I doubt Herlihy was personally involved in the bonus-disclosure decision, as broad negative covenants are standard in merger agreements, and disclosure schedules typically aren't prepared by senior M&A partners like Herlihy...But still, BofA's disclosures are likely to include lots of communications between Herlihy and BofA directors, and much of it undoubtedly occurred under incredible time-pressure, which increases the odds that something embarrassing will be revealed exponentially."
  • A Tactic Designed to Shift the Blame, writes Steven M. Davidoff, a legal expert who writes at the New York Times and is a professor at the University of Connecticut. "The disclosure of attorney-client privileged material by Bank of America can only be seen as a calculated risk. The board would not voluntarily release these documents unless they provided a defense or otherwise if the board felt that they could pinpoint blame at a particular person, i.e., a non-director, one who is now likely to be departed. More likely, the documents Bank of America chooses to disclose will show that their lawyers gave legal advice to the bank, and that legal advice just turned out wrong. Is there liability for such a mistake? Even when it seems so coldly calculated as this one? That is a central question, and perhaps where more bodies lie, this time at the law firm level."

The Debate

More on Wall Street and Banking

Is the White House Finally Fed Up with Wall Street?

Officials are taking a harder line against bonuses and financial lobbyists, and some pundits think they might be serious

October 19, 2009
The Meaning of the Hedge Fund Billionaire's Arrest

Raj Rajaratnam is arrested for trading on insider information, spurring speculation about further busts

October 19, 2009
Disgraced Bank Executive Forgoes Salary, But Does it Matter?

The feds tell Bank of America chief Ken Lewis to forfeit his $1.5M salary

October 16, 2009
After Brief Hiatus, Goldman Sachs Profits Prompt Bloggers to Retrieve Pitchforks

With taxpayer help, Goldman posts sky-high profits and bonuses, and bloggers let loose the vitriol

October 16, 2009
Yawning at Wall Street's Record Payday

What does the lack of outrage at bankers' best year ever--$140 billion in compensation--mean?

October 14, 2009