An institutional investor is calling on Bank of America CEO Brian Moynihan and the bank’s board to investigate allegations from former employees that they were encouraged to deny mortgage modifications to homeowners.
In a letter filed with the Securities and Exchange Commission, the shareholder, Houston-based Finger Interests Number One, blasts the board and the company’s management in light of the employees’ claims, saying “nothing has really changed” under Moynihan and the leadership of Chairman Charles Holliday.
“The case and, more importantly, the affidavits … say volumes about the failures of senior management and the board of directors to materially change the corporate culture that has long existed at Bank of America prior to Brian Moynihan’s ascendance or most of this board of directors’ inauguration,” says the letter, which the SEC posted on its website Monday.
“Each new headline chips away at the company’s image and damages its standing with customers and potential customers. In consumer perception of reputation among banking companies, Bank of America ranks dead last.”
According to securities filings, Finger Interests owns roughly 1 million Bank of America shares, or less than 1 percent of the bank’s outstanding shares. The company’s two key leaders could not be reached for comment Monday because they were traveling, company officials said.
The letter comes on the heels of statements – six from former employees, one from a contractor – filed this month in federal court in Boston, where class-action status is being sought for a lawsuit against the bank over the federal Home Affordable Modification Program.
The homeowners in the lawsuit claim that the Charlotte-based bank wrongfully denied them modifications under HAMP and violated the program’s rules. Bank of America, the lawsuit says, would “string homeowners along with no intention of providing actual and permanent modifications.” Among other things, homeowners complained the bank falsely told them their paperwork had not been received.
According to the former employees’ statements, Bank of America employees were given gift cards and $500 bonuses if they steered homeowners into foreclosure rather than a modification.
The bank is expected to file its reply to the employees’ claims next month. On Monday, a bank spokeswoman would not comment beyond a statement the bank issued last week. The statement calls the employees’ allegations “absurd” and “rife with inaccuracies” and says the bank has a “long-standing policy only to foreclose as a last resort when other available options to help keep people in their home have been exhausted.”
But the employees’ statements have led California Rep. Maxine Waters, the top Democrat on the House Financial Services Committee, to call for an investigation of Bank of America.
Finger Interests said Moynihan and the board of directors should look into the employees’ claims and report to shareholders on the findings.
“If true, the six affidavits … are damning and evidence of unethical behavior and, more importantly, point to a corporate culture of not just ‘short termism,’ but of outright corruption and a disregard for laws, regulation and, of course, customers,” Finger Interests’ letter says.
Finger Interests sold Charter Bancshares in 1996 to NationsBank, which later acquired BankAmerica Corp. in a deal that led to the bank’s name being changed to Bank of America.
Over the years, Finger Interests has been a frequent critic of Bank of America’s leadership, even before Moynihan took charge in 2010. The firm opposed Moynihan as a successor to Ken Lewis, saying Moynihan was part of the leadership team involved in the bank’s 2009 purchase of Merrill Lynch.
Finger is also among investors who sued Bank of America over the Merrill Lynch purchase, an acquisition that angered investors who said they were misled about Merrill’s declining financial health. A federal judge in New York in April approved a $2.42 billion cash deal to settle the claims.
In its letter, Finger Interests says Bank of America has “made great strides in cleaning up its balance sheet and building capital.”
But, the company says, it is “deeply concerned that this corporate culture of deceit has continued to exist under Brian Moynihan and Charles Holliday’s board of directors.”
The firm says it worries Bank of America “will never be a great company until the corporate culture has changed.”
It’s unclear how much the HAMP case might cost Bank of America. An attorney for homeowners suing the bank said the class members could total in the hundreds of thousands.
In August, a judge is expected to hold a hearing on the request for class certification.
A Bank of America spokesman said Monday that the bank would not speculate about the litigation’s potential costs.