From the October 2009 issue of Research Magazine • Subscribe!

McCann, BofA in Legal Dispute

McCann sued the largest U.S. bank in August in order to lift a "non-competition" clause in various Merrill agreements and thus free him to take a job with a rival.

Lawyers for Bank of America and former Merrill Lynch & Co brokerage chief Robert McCann have reportedly been in talks to resolve his lawsuit accusing the bank of blocking him from taking a job with a rival, which some experts speculate is UBS.

McCann sued the largest U.S. bank in August in order to lift a "non-competition" clause in various Merrill agreements and thus free him to take a job with a rival. Bank of America is arguing that McCann must stay put through January 2010.

In a court filing, McCann says he gave written notice on January 5 that he would resign and that Bank of America accepted his reason for leaving. But, McCann maintains, the bank rescinded its acceptance the following month, fired him effective January 30, 2009, and won't let him take a job with a rival until a year after the firing. "I face the likelihood of missing out on what I believe is a 'once in a lifetime' opportunity," he explains in the court documents.

Bof A says McCann is "intimately familiar" with its long-term strategic plans and that it would lose plenty of business if he went to work for a rival.

In August, Bank of America tapped Sallie Krawcheck, the former CFO and wealth management chief of Citigroup Inc., to run the combined brokerage operations of BofA and Merrill Lynch.

McCann and Bank of America are also arguing over if he should recover more than $18 million from company stock.

Also in mid-September, the New York Attorney General's office subpoenaed five members of Bank of America Corp.'s board of directors as part of an investigation into the bank's acquisition of Merrill Lynch & Co., according to various reports. The subpoenas may be part of fraud charges that could be raised in the coming weeks.

Merrill, with the knowledge of Bank of America executives, paid Merrill employees $3.6 billion in bonuses just before the deal closed, despite losing $27.6 billion in 2008.

Recently BofA moved to settle a separate investigation in August involving disclosures about the Merrill bonuses with the SEC. In mid-September, U.S. District Judge Jed Rakoff threw out the $33 million settlement saying it "cannot remotely be called fair" and needlessly penalized BofA shareholders. He ordered the case to go to trial Feb. 1.
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