Gary Lynch, the former Securities and Exchange Commission enforcement head who later helped Morgan Stanley and Credit Suisse AG tackle legal disputes, is looking to repeat his success at the biggest U.S. bank.
Bank of America Corp. announced yesterday that it had hired Lynch, 60, as its global chief of legal, compliance and regulatory relations. Scott Silvestri, a Bank of America spokesman, said Lynch wasn’t available for an interview.
Chief Executive Officer Brian Moynihan, 51, brings in Lynch as the Charlotte, North Carolina-based bank deals with lawsuits and investigations tied to soured loans from the housing boom. The lender, which posted its first profit in three quarters yesterday, had its capital plan rejected by the Federal Reserve last month.
“It’s a great challenge, and he’s more than up for it,” said Harvey Pitt, SEC chairman from 2001 to 2003 and now head of Washington-based consulting firm Kalorama Partners LLC. “Regulators will be receptive to him because he has the experience and knows what their concerns are, but also because he’s a straight shooter.”
Lynch, who started at the SEC in 1976, headed the regulator’s enforcement division from 1985 to 1989. He led investigations of Ivan Boesky, the former takeover investor who was convicted of insider trading, and Michael Milken, the high-yield bond chief at Drexel Burnham Lambert Inc. who went to prison for securities violations.
Lynch joined Credit Suisse First Boston as it faced a federal probe into its handling of initial public offerings during the dot-com bubble. He took over Morgan Stanley’s legal division after it lost a $1.57 billion verdict as its lawyers failed to turn over relevant e-mails.
Among the Best
“Companies that find themselves facing these really big issues need people like Gary, and he’s clearly among the best,” said Joseph Grundfest, a former SEC commissioner who is now a Stanford Law School professor. “He’s a problem solver, in a way that transcends the narrow legal questions and is able to address the larger business and political policy issues. And the reality is that a company like Bank of America has to simultaneously solve all of those questions.”
Lynch’s position was newly created, and general counsel Ed O’Keefe will report to him, the bank said. Lynch, who’s been in London since 2009, is moving back to New York.
Lynch may face a greater variety of issues at Bank of America than at his previous firms. The bank was among the 14 largest U.S. mortgage servicers that agreed with federal regulators to review all foreclosed loans from 2009 and 2010, and pay back losses in cases that were mishandled.
Bank of America still faces an investigation by state attorneys general into foreclosure practices. It has agreed to pay insurers and investors more than $7 billion to retire mortgage-repurchase claims since Moynihan became CEO in 2010.
“Lots of people can litigate in court, but few people know how to negotiate with regulators because you’ve been there and done that yourself,” said John Coffee, a law professor at Columbia University in New York. “The major banks are still going to have complicated negotiations with the SEC and other financial regulators, and it’s good to have someone who knows how the other side thinks and how to persuade the other side.”
Lynch is among at least three former SEC enforcement directors helping oversee legal departments at the largest global banks. Deutsche Bank AG General Counsel Richard Walker stepped down at the agency in 2001. JPMorgan Chase & Co. named Stephen Cutler to be its top legal officer in 2006, about a year after he left the government.
SEC Inspector General H. David Kotz has questioned how staff members interact with former SEC enforcement attorneys in reports, including examinations of how the SEC handled probes of Stanford Financial Group, Allied Capital, and Pequot Capital Management. Kotz said in a 2008 report that a lawyer for a major Wall Street firm with an interest in the Pequot investigation was given special access to senior SEC officials.
Lynch, who earned his law degree in 1975 from Duke University, was one of John Mack’s first hires at Credit Suisse First Boston when Mack became CEO in 2001. He helped negotiate a $100 million settlement in 2002 of charges the firm allotted sought-after shares of initial public offerings in exchange for investor kickbacks in the form of higher commissions.
Mack recruited Lynch to join him when he returned to Morgan Stanley in 2005, shortly after the firm had lost a $1.57 billion verdict in a case brought by financier Ronald Perelman, leading the then-general counsel to step down. In 2007, the firm won an appeals court decision that overturned the verdict.
Leaving Morgan Stanley
Less than two months after Mack stepped down as Morgan Stanley’s CEO, Lynch announced in February 2010 that he would give up his role as chief legal officer. Lynch remained with the firm as vice chairman and advised on policy and strategy issues until he left last month.
“Gary is both very smart and also very experienced, and they’re not always the same thing,” Pitt said. “Whatever your past reputation has been, you always have to prove yourself all over again, but in Gary’s case, that’s not going to be an issue.”