Bank of America's (BAC) Lewis Sold CFO His Porsche

Bank of America’s CEO Ken Lewis sold his CFO Joe Price a Porsche in 2007. According to SmarTrend, “While the details of the sale remain private, the transfer itself raises serious doubts regarding ethics of the relationship between Lewis and Price.”

Maybe it does raise ethical, governance, and tax issues. But, maybe it doesn’t.

It is not clear whether the sale of the Porsche was an “arm’s length” transaction. If Price paid the normal, going price for the car, the price which he would have paid a car dealer, then it is probably not an issue at all.

But, what if Lewis sold Price a $100,000 car for $1? Did Price pay taxes on a $1 transaction which should have been an $100,000 transaction? If so, he may have an IRS problem. And, Lewis may have to answer the question of  whether the deal was an elaborate way to “buy off” his CFO by doing him a favor on the Porsche’s price. A public company CFO is supposed to have a level of independence from his boss when it comes to financial reporting and relationships with the firm’s auditors and audit committee.

Lewis is getting better and better at digging his own grave.

Douglas A. McIntyre