New Fannie Mae CEO comes with Bank of America back story

Fannie Mae just named its new CEO to lead the company, hopefully, out of conservatorship and into whatever housing finance system will come.

Timothy Mayopoulos was promoted from general counsel to the top spot. Interestingly, Alison Frankel pointed out on Reuters – roughly the same time as the Fannie announcement – that Mayopoulos may be involved in the stage of the Bank of America Merrill Lynch merger mess.

Investors sued then BofA CEO Ken Lewis this week for allegedly covering up Merrill Lynch losses before the merger in 2008. Mayopoulos was the former general counsel for BofA at the time.

Frankel points out an interesting tidbit from a summary judgment brief filed in the class action suit:

“Lewis’s brief implies (but does not directly state) that [then BofA CFO Joe] Price had spoken not only to Bank of America’s general counsel at the time, Timothy Mayopoulos, but also to BofA’s outside lawyers at Wachtell, Lipton, Rosen & Katz. For Lewis, it doesn’t much matter who Price talked to — or even whether Price really received the legal advice he allegedly passed along to Lewis.”

Then consider when Mayopoulos left BofA. And why.

A New York Times report in 2009 showed just days after the questionable share holder vote to approve the Bank of America Merill Lynch merger, Mayopoulos was dismissed, and then New York Attorney General Andrew Cuomo wanted to know why.

“If he was terminated because of disagreements on disclosure on Merrill, that’s relevant. It goes right back to the effectiveness of management,” said Charles Elson, a BofA shreholder in the Times story. “You can always disregard a general counsel’s advice, but the question is, Why did you?”

Cuomo filed a lawsuit against Bank of America over the mess. At the heart of his argument was that Lewis and Price ignored Mayopoulos.

The Securities and Exchange Commission didn’t agree with Cuomo. Their own investigation found Mayopoulos was let go to make room for Brian Moynihan, who became CEO after Lewis retired in December 2009, according to a story in the Wall Sreet Journal at the time.

BofA settled the allegations with the SEC over the Merrill Lynch merger in 2010 for $150 million.

The new shareholder suit filed this week targets Lewis mostly for ignoring outside counsel firm Wachtell, Lipton, Rosen & Katz. The Cuomo complaint originally alleged both Lewis and Mayopoulos ignored Wachtell, which Frankel reminds us Mayopoulos denies:

“BofA former general counsel Mayopoulos has repeatedly testified that he’s the one who advised Price on Dec 3, 2008, that the bank didn’t need to inform shareholders of the revised Merrill loss estimate. (Mayopoulos has testified that he made that decision based on Price’s assertion that the new estimate was $7 billion in losses. He was allegedly not aware that the new projection was actually more than $10 billion…”

With the new suit, some attorneys said the facts may have to be sorted out in trial. But the saga now involves no longer just the general counsel but the CEO of the country’s largest mortgage financier.

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