Bank of America Fires Two Bankers Who Handled Enron, People Say
By Mark Lake
New York, Jan. 30 (Bloomberg) -- Bank of America Corp. fired two bankers who oversaw the firm's relationship with Enron Corp. after the bankruptcy of the biggest energy trader caused the bank to lose $231 million, people familiar with the matter said.
The third-biggest bank dismissed Jo Tamalis, the client manager for Enron, and Marcia Bateman, who managed loans to the energy firm, the people said. Tamalis confirmed she no longer worked for the bank and declined to say why. Bateman couldn't be reached.
Bank of America is the first bank to fire executives because of Enron's collapse. Other financial firms from J.P. Morgan Chase & Co. to Citigroup Inc., which wrote off more than $2.7 billion in the fourth quarter because of Enron and Argentina's debt default, may take similar steps, investors say.
``If you assume they were responsible, you as an investor like to see people held accountable,'' said Phil Larkins, market strategist for Legacy South Inc., which manages $400 million in assets and owns 200,000 Bank of America shares. ``Bank of America has a very large exposure to Enron.''
The Bank of America firings are some of the ripple effects in the financial services industry from Enron's collapse. Congressional investigators are demanding names of investors in limited partnerships Enron used to inflate earnings and hide debt from shareholders. Merrill Lynch & Co. executives invested in one of the partnerships, which also drew money from Citigroup, American International Group Inc. and other firms.
Money managers including Putnam Investments, the fourth largest U.S. mutual fund company, Federated Investors Inc. and Dreyfus Corp. bought bonds issued by Enron trusts, according to regulatory filings. Northern Trust Corp., the trustee for Enron's retirement plan, owned the bonds, and also said this month it held more than $24.5 million in unsecured Enron debt.
Bank of America was one of the biggest lenders to Enron as part of a $3 billion credit facility that was arranged by J.P. Morgan and Citigroup.
Bank spokeswoman Georgie Shields declined to comment on Tamalis and Bateman.
`Bad Calls'
``Bankers have made a lot of bad judgment calls regarding Enron,'' said Carl Domino, president of Northern Trust Value Investors, which manages $1.5 billion, including some Bank of America shares.
Tamalis, reached at her home in Houston, declined to comment. ``I don't want to give an interview,'' she said.
The largest bankruptcy helped push J.P. Morgan and FleetBoston Financial Corp. into their first quarterly losses in years. J.P. Morgan Chase wrote off $456 million of trading losses and loans to Enron and still has exposure to potential losses of $2.06 billion. Bank of America said this month loans and other business with Enron cost the company $231 million.
For Bank of America, the losses on loans to Enron came after a string of bad loans hurt the firm's earnings. The bank wrote off a total of $1.19 billion of bad loans in the fourth quarter, up 11 percent from a year earlier.
``Enron may well have been the straw that broke the camel's back,'' Domino said.
Congress will be looking into the role of Enron's financiers, especially those in the limited partnerships, in hiding debt from investors, said Representative Henry Waxman, a California Democrat.
``This needs to be thoroughly investigated,'' he said. ``One of the big mysteries about Enron is who the secret partners were, what they knew about Enron's precarious financial situation, and whether they did anything wrong."
Other Cuts
Bank of America said last year it planned to cut 600 jobs in corporate and investment banking to help reduce costs. As part of those cuts, the bank is firing three loan syndication executives who worked in project finance: Parker Knight, managing director and head of international syndicated finance, Brian Goldstein, head of U.S. project finance syndications, and John O'Neill, head of Asian project finance.
Their jobs are being cut as part of Bank of America's restructuring of its global corporate and investment bank, said William Hodges, the bank's head of debt capital markets.
``The impact on these three individuals leaving the company is not related to Enron in any way,'' Hodges said.
The bank is scaling back lending for capital projects, such as refineries and generation plants, in the U.S. and Asian energy and power industries, Hodges said. That type of lending ties up capital, and Bank of America isn't willing to continue doing it unless borrowers agree to give the bank more lucrative business as well.
``It entails risk factors that are less than highly desirable,'' Hodges said.
Loan syndication employees in Latin America and Asia who previously reported to Knight now report to executives in those regions. ``In Latin America and Asia, we now have a regional model,'' Hodges said. ``The head of the region is now responsible for all of our client coverage and business development.''
Hodges said Bank of America is ceasing, on a stand-alone basis, traditional project finance in the U.S., a unit headed by Goldstein, and in Asia, a unit headed by O'Neill. |
