How did Bank of America’s legal liabilities cost its shareholders

$91 billion since 2008?

From personal experience, I would argue that it is because the

company’s board has been AWOL.

Other shareholders seem to agree. When they met on May 6,

2015 to elect the company’s directors and approve various

proposals such as those relating to its pay practices, Bank of

America shareholders gave four board members a resounding

boo. Only 67% of shares cast were in favor of Thomas May,

who runs the board’s corporate-governance committee, down

from 98% last year. Three other board members up for election

received only 72% support from shareholders, well down from

last year’s figures.

The day before the shareholder meeting, I met privately with

Sharon Allen, Chairperson of the Audit Committee of the board.

I hoped to discuss her role in protecting the shareholders from

the mischief of Bank of America management. What occurred at

was very revealing.

The meeting arose as a result of information gleaned from a

longtime battle I have waged with the bank over an $83,000

mortgage dating back to 1996 and resulting in the loss of my

home.

As a business person knowledgeable about corporate

governance issues I knew that directors have fiduciary duties to

protect shareholders and other stakeholders from management

improprieties. I asked for the meeting to share with the audit

committee the troubling information I had learned during my

fight with the bank. Perhaps I was naïve, but I expected the audit

committee to listen to my story and to resolve my issues

believing that such a resolution would be in the interest of all

involved. I remembered how the Chairman of Enron’s Audit

Committee testified before Congress saying: “nobody told me

anything.” I wanted to make sure the Bank of America Board

was aware of fraudulent practices at the bank dating back to

1996. Ignorance cannot be used as an excuse.

I had asked that James Cheek, independent outside

disclosure counsel for the audit committee, attend the meeting.

He was appointed to his post under settlements the bank reached

with the Securities and Exchange Commission and the New

York State Attorney General.

But Mr. Cheek did not appear. In his place was Jana Litsey,

chief of litigation for the bank, who dominated the meeting in an

attempt to sanitize the conduct of Management. Rather than

getting answers from Ms. Allen relating to her fiduciary duty, I

heard excuses from Ms. Litsey. Despite my good faith effort to

advise Ms. Allen of the bank’s practices, I was stonewalled

when asked for her point of view. Though the Bank of America

board is supposed to be independent of management, it clearly

was not in this meeting.

My insight on the subject results from the fact that on March 1,

1996 Nationsbanc Mortgage Corporation, a predecessor of Bank

of America, fraudulently invoked the jurisdiction of the

Cuyahoga County Court of Common Pleas by claiming to be the

“owner and holder” of my note and mortgage. This was simply

untrue. In Ohio, the Ohio Supreme Court determined that a

plaintiff in a foreclosure action must have standing at the time it

files the complaint in order to invoke the jurisdiction of the

court. (Fed. Home Loan Mtge. Corp. v.Schwartzwald, 134 Ohio

St.3d 13, 2012-Ohio-5017at ¶ 41-42.) After pretending to own

my note and mortgage, the bank continued to litigate against me

vigorously for over 11 years, hiring a major law firm Jones Day.

All over an $83K mortgage.

We lost our home of 29 years in 2007 under the color of law.

Where is the board of directors at Bank of America in all of this

pursuant to their fiduciary responsibilities to make sure the bank

is run in the best interests of shareholders and stakeholders?

I can tell you by experience, nowhere to be found.

Without independent directors protecting the interests of

shareholders and stakeholders a management proven to be too

big to fail and too big to jail will only be emboldened to

continue the actions that have proved so harmful to so many.

How harmful? Consider these figures from Bank of America’s

most recent annual report.

“Excluding expenses of internal or external legal service

providers, litigation-related expense of $16.4 billion was

recognized for 2014 compared to $6.1 billion for 2013.”

The annual report also makes references to management’s

inability to determine possible liabilities related to its mortgage

practices. This is not rocket science, my past requests for audits

of compliance made to management and the board could

certainly have led to quantifying for shareholders the exact

exposure amounts to be included in the bank’s annual report

and federal filings. This is a blatant omission of disclosure by

Management.

Federal securities laws also impose liability on directors for

intentional or reckless misrepresentations or material omissions

made in offering documents or proxy solicitations.

In short, the Bank of America board must shape up or ship

out.