By Christina Rexrode and Emily Glazer
More changes are coming at the top of Bank of America Corp.
The bank is looking for a replacement for Gary Lynch, the
general counsel who guided the company through a storm of legal
crises and was often its face to regulators. Mr. Lynch, who turns
65 years old on Saturday, is expected to step down from the job in
coming months, according to people familiar with the matter.
It is likely that Mr. Lynch will stay at the bank in a different
capacity, according to other people familiar with the move. Bank of
America Chairman and CEO Brian Moynihan added the role of vice
chairman to Mr. Lynch's title this week, a job that is akin to
being a senior adviser.
The bank earlier this week announced that its chief financial
officer Bruce Thompson is leaving, and its wealth-management head
David Darnell is retiring, raising questions about continuity in
the bank's top leadership and about who might replace Mr. Moynihan
if he were to leave.
Mr. Lynch shepherded the bank's blockbuster mortgage-securities
settlement with the Justice Department, which was completed last
year. Mr. Moynihan has described it as the last of Bank of
America's major crisis-era legal problems, and many expected Mr.
Lynch to step down once it was resolved.
The search for Mr. Lynch's replacement has been ongoing for
months.
The bank is looking at several outside candidates, most of whom
are partners at big Wall Street law firms, according to people
familiar with the situation. An agreement with one, a partner at a
law firm, previously fell through, according to one of the people.
It isn't clear when a new general counsel might be announced,
though it is likely to happen in coming months, according to people
familiar with the situation.
Mr. Lynch wasn't considered a potential CEO successor. But he
had gained respect inside and outside the bank as a battle-hardened
problem solver. John Mack brought him to Credit Suisse First Boston
during regulators' crackdown on banks accused of taking kickbacks
on the initial public offerings of hot tech stocks. After Mr. Mack
moved to Morgan Stanley, he brought along Mr. Lynch to help fix the
bank's rocky relationship with regulators.
Bank of America tapped Mr. Lynch four years ago as its legal
problems piled up. He joined in the summer of 2011, around the time
the bank announced a $8.5 billion settlement with investors who
said they were misled about the quality of mortgage securities sold
to them by Countrywide Financial Corp., which Bank of America had
bought.
Mr. Lynch, a former enforcement director of the Securities and
Exchange Commission, has criticized federal prosecutors and
regulators for overstepping in their crusades against the banks. At
an industry conference last year, he said that "some of the
prosecutors' actions" have "generated a lot of cynicism within
organizations," noting that the Justice Department's
mortgage-securities accusations against Bank of America largely
involved the actions of companies that the bank bought after the
act.
"Why (is) this kind of money is being paid into the government
coffers?" Mr. Lynch asked, a reference to the giant fines being
levied against the banks, then later added: "To the extent you have
people lose respect for the cops patrolling the beat you have a
problem."
Mr. Lynch worked at a law firm before joining the SEC, where he
rose to the job of enforcement director at age 34. There, in the
savings-and-loans scandals of the 1980s, he oversaw insider-trading
investigations against traders including Michael Milken and lobbied
for jail time for wrongdoers. The Wall Street Journal called him
"The most feared man in the financial markets" when he left the
agency.
Mr. Lynch ran Bank of America's legal department during a period
when it was hammered by one mega settlement after another. Most
notable was the Justice Department's mortgage-securities settlement
last August for $16.65 billion--the biggest ever between the U.S.
government and a single entity.
Since the crisis, Bank of America has piled up more than $70
billion in legal settlements, fines and related costs, far more
than any of its competitors. The bank's legal costs have been
relatively low for the last four quarters.
In general, Bank of America under Mr. Lynch's guidance has tried
to settle lawsuits with the government quickly, with one exception.
In the Hustle case, named after a former Countrywide program, the
Justice Department accused the bank of churning out mortgages
without regard for their quality. The bank made the unusual move to
go to trial against the Justice Department. The bank lost, and it
is now appealing the verdict, arguing that it shouldn't be
penalized for a program that ended before it bought Countrywide and
that the judge who presided over the case is biased against the
banks. That case is on appeal.
Write to Christina Rexrode at christina.rexrode@wsj.com and
Emily Glazer at emily.glazer@wsj.com
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