A couple of years ago, I posted about the lawsuit filed by BankAtlantic and its holding company against Richard Bove, and his employer, Ladenburg Thalmann & Co., Inc. The lawsuit was based on Bove’s report entitled "Who Is Next?", which ranked 107 bank companies from riskiest to least risky, using two financial ratios as benchmarks on two different lists. BankAtlantic Bancorp., the holding company that controls BankAtlantic, was 10th on one list, and 12th on the other.
Bove is back in the news, courtesy of a story in today’s New York Times entitled "The Loneliest Analyst," which, from its title, gives a pretty good idea of his status, and discusses his travails since the lawsuit was filed.
The good news for Bove is that the suit was settled three months ago and that he paid nothing to the plaintiffs. But the bad news is that his former employer — he quit in February as a result of disagreements over the lawsuit — refused to defend him, causing him to rack up $800,000 in legal bills. Then, industry groups that typically represent analysts or the security industry rejected his requests for help with his legal fees.
The plaintiffs received a $350,000 settlement from Ladenburg Thalmann, with no admission of liability. But the article makes clear that Bove was correct in his assessment of the bank’s holding company’s financial health, which forced it to go on offense and file suit against him and his employer. The article details several instances of questionable management practices by Alan Levan, the holding company’s chairman and CEO, who, along with his son and a few associates, controls the bank and the holding company.
As part of its story, the Times has available several documents from the lawsuit. The settlement agreement between the plaintiffs and Bove is located at pages 69-82. While Bove was not required to pay any money as part of the settlement, the agreement provides that if Bove receives more than $100,000 from Ladenburg Thalmann as payment for his "costs, fees, or expenses in defending against the Litigation or in settling the Litigation," he will pay $100,000 to the plaintiffs.
The agreement also provides that Bove is not required to make any statement about the lawsuit or settlement or underlying facts, but if he chooses to do so, then the plaintiffs have the right to publish a statement from Bove that is attached as Exhibit B to the settlement agreement.
However, the article notes that as part of the settlement, Bove issued a statement clarifying that his rankings had not included BankAtlantic. I assume that’s the statement attached to the agreement, but the article isn’t clear. Also, although Levan denied that the bank wanted money from Bove, its lawyer indicated in emails that the bank wanted as much as $650,000 from him, as well as a more strongly worded statement than what Bove agreed to.
Bove continues to work as a bank analyst for another firm, and is held in high esteem by his colleagues and even the banks that he covers. But it’s hard to read the article and not conclude that he was screwed, not only by the plaintiffs, but by his former employer and the industry groups that would typically defend someone in his position.