Magazine article American Banker

ImClone Exec Said to Defraud B of A of $44M

Magazine article American Banker

ImClone Exec Said to Defraud B of A of $44M

Article excerpt

Bank of America Corp. is the latest banking giant to have a brush with a headline-making corporate scandal.

The Charlotte, N.C., company has been linked to Samuel D. Waksal, the former chief executive officer of the biotech firm ImClone Systems Inc. who had been (and may still be) a customer of its private client group.

Adding bank fraud to the list of charges against Mr. Waksal, the government alleges in a federal grand jury indictment made public last week that he lied when obtaining $44 million of personal loans from Bank of America.

It was unclear Friday how much of that $44 million is at risk, and a spokeswoman for Bank of America would not discuss the loans.

Lori Appelbaum, a Goldman Sachs Group Inc. analyst, said in an interview Friday that the case highlights a new area of concern for banks. "The Waksal situation just opens up the further risks that the banks have from corporate criminals, not only at the corporate level, but at the private-client level as well."

Like other large banking companies, Bank of America often tries to win personal banking business from executives at its corporate clients.

But big loans to private clients are becoming a headache for Bank of America. Its second-quarter earnings report last month noted a sharp increase in reserves for bad loans within the company's asset management unit. The unit, which includes the private bank that serves wealthy clients, more than quintupled its provision for credit losses in the quarter, to $144 million.

In a conference call with analysts last month, Bank of America's chief financial officer, James H. …

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