NEW YORK/ORLANDO, Florida (Reuters) - Bank of America Corp executive Joseph Price has already been moved from his job as CFO, but a lawsuit from New York's Attorney General raises questions about whether Price might need to be sidelined entirely.
The consumer, small business and credit card units Price, 49, now heads are at the heart of the largest U.S. bank. These units include most of the troubled loans that have triggered the bank to report two consecutive quarters of losses.
The businesses need attention that Price may not be able to give as he deals with the lawsuit, analysts say.
"The lawsuit is going to be a distraction," said Gary Townsend, chief executive officer of Hill-Townsend Capital. "It is unhelpful to Bank of America in dealing with the business challenges it has."
The Charlotte, North Carolina-based bank has been grappling to right itself after its acquisition of Merrill Lynch & Co just over a year ago became mired in controversy over soaring losses and bonus payments to Merrill bankers.
Chief Executive Brian Moynihan, who took charge after Kenneth Lewis retired at the end of last year, is hoping to distance the bank from the 2009 problems that triggered its stock slump to 25-year lows last February.
There are signs the bank is recovering and it said last month that the credit quality of many of its loans is improving. Bank of America shares finished 2009 up almost 7 percent, while the broader KBW Banks Index finished the year down 4 percent.
But the Merrill controversy has not gone away. New York Attorney General Andrew Cuomo accused the bank, Lewis -- and Price -- on Thursday of intentionally failing to disclose massive losses at Merrill prior to a shareholder vote on the merger.
The New York suit comes as the U.S. Securities and Exchange Commission reached a preliminary settlement agreement with the bank over similar issues.
Some analysts and people familiar with the bank suggest that Price, who has been at the bank since 1992, should take a leave of absence.
A former accountant who worked at PriceWaterhouse before joining the bank, Price will have his attention divided between the demands of running the largest U.S. consumer bank and fighting a complex civil lawsuit.
"It puts them in a very difficult position when they're trying to move their strategy forward, to have an executive under such gun fire," said Eleanor Bloxham, chief executive of corporate governance advisory firm The Value Alliance.
A leave of absence "may be warranted in this case simply from the standpoint of his own ability to manage the business, even if the bank supports him publicly," she said.
Price's counsel, William Jeffress, Washington, D.C.-based partner at Baker Botts LLP, declined comment on whether Price would be replaced, saying that was between his client and his employer.
Bank of America spokesman Scott Silvestri declined to comment on any possible change in Price's status.
CHANGING ROLES
As it did with Lewis while he battled multiple investor lawsuits and regulatory inquiries over the Merrill acquisition, Bank of America has publicly stood by Price since the charges were announced.
To some extent, the bank and Price may consider that, since he is no longer directly communicating with investors, the charges against him cannot do any new damage, some analysts noted.
"Bank of America probably knew where (Cuomo's probe) was heading and yet just in January they named Joe Price to a new role," said Jaime Peters, an analyst at Morningstar in Chicago. "(That) shows the confidence they have in him to go ahead and run one of their biggest and most important businesses."
The consumer unit Price now heads includes large portfolios of sub-prime loans Bank of America acquired when it bought mortgage company Countrywide in 2008 and one of the worst performing U.S. credit card portfolios. Moynihan, who previously held Price's role, moved the former CFO to the job when he took the reins from Lewis as part of a wider management reshuffle at the start of the new year.
But still, as the bank looks to move on under Moynihan, the lawsuit and Price's presence at the bank could be a vivid tie to the troubles that caused its share price to plummet and ultimately prompted Lewis to retire last year.
"There's no question in my mind that (the charges are) damaging to the reputation of Bank of America," Townsend added. "Bank of America has it's work to do to repair it's standing with investors and the public more generally."
(Reporting by Elinor Comlay and Joe Rauch; editing by Andre Grenon)
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source: http://www.reuters.com/article/idUSTRE6145IJ20100205
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