Enron Fallout Claims BofA Execs
Bank of America Corp., which recorded $231 million in Enron Corp.-related losses for the fourth quarter, has fired three veteran employees in Texas who managed loans to Enron. And the head of its group in New York that financed energy companies has resigned, the bank said Wednesday.
They are the first bank executives to be ousted in connection with Enron’s collapse.
Thousands of employees of Enron, a Houston energy trading company that filed for bankruptcy last month, have lost their jobs and, for many whose 401(k) accounts were invested in Enron stock, their retirement savings as well.
Charlotte, N.C.-based Bank of America, the nation’s third-largest bank, said Wednesday that three managers left the firm last week: 21-year employee Jo Tamalis, a client manager for the bank’s natural resources group in Houston; 25-year veteran Marcia Bateman, a loan portfolio manager in Dallas; and 14-year employee James Allred, a loan portfolio manager in Houston.
Bank of America spokesman Jeff Hershberger declined to discuss the circumstances of the workers’ departure, but one of the three workers, speaking on the condition of anonymity, said they were forced out because their duties had included the Enron account.
The other workers didn’t return telephone calls.
The bank also said Steve Bragg, a New York investment banker who headed the natural resources group at Banc of America Securities, “has decided to resign from the company to pursue other opportunities.”
The bank said Bragg will stay on for a few weeks while a “new leadership structure” is worked out for his group, which provided loans, securities underwriting and other services to energy firms.
Bragg didn’t return telephone calls Wednesday.
In addition to the $231-million charge recorded against its quarterly earnings, Bank of America had an additional $272 million in potential Enron losses as of Dec.31, spokeswoman Eloise Hale said, bringing its total exposure to more than $500 million.
Nonetheless, its fourth-quarter profit rose by 49% to $2.06 billion, beating estimates, as falling interest rates spurred lending.
Bank stocks rose Wednesday after taking a drubbing Tuesday after PNC Financial Services Group restated its earnings amid regulatory scrutiny over its accounting.
Bank of America’s stock rose by $2.46 Wednesday to close at $61.66 on the New York Stock Exchange, compared with $60.80 before its earnings were announced Jan. 22.
Though Bank of America’s Enron losses were large, other banks were more gravely wounded when Enron filed the largest-ever Chapter 11 bankruptcy petition.
The biggest loser, J.P. Morgan Chase & Co., has more than $2 billion in potential exposure to Enron losses after taking $450 million in fourth-quarter charges related to Enron.
J.P. Morgan, which unlike Bank of America was one of Enron’s lead lenders, reported a $332-million fourth-quarter loss, contrasted with a $708-million profit a year earlier.
A spokeswoman for J.P. Morgan, the second-largest U.S. bank, said the firm has had no Enron-related job losses.
The nation’s largest banking company, Citigroup Inc., had teamed up with J.P. Morgan to arrange $3 billion in bank loans for Enron.
Citigroup wrote off $228 million before taxes in the fourth quarter as a result of losses on Enron loans and securities holdings.
