Troops from Continental Seen Gaining at New B of A

SAN FRANCISCO - Is David A. Coulter "Continentalizing" BankAmerica Corp.?

That's what some insiders see happening, because the new president, who is slated to become chief executive in January, has chosen two longtime veterans of Continental Bank Corp. - which BankAmerica acquired - for two of his most senior appointments so far.

In the most recent move, Mr. Coulter last month selected 18-year Continental veteran Michael E. O'Neill to replace Lewis W. Coleman as the bank's chief financial officer. Mr. Coleman resigned after being passed over as the successor to retiring chief executive Richard A. Rosenberg.

That move followed the August promotion of 26-year Continental veteran Michael J. Murray into Mr. Coulter's old job of vice chairman of the U.S. corporate and international group.

Many current and former Continental executives said they see the two promotions as a sign that Mr. Coulter covets Continental's wholesale and money-center banking expertise.

"There's a lot of gloating in Chicago," where Continental was based, enthused a senior executive there.

Even so, the promotion of Mr. O'Neill, 49, came as a surprise to many. That's because his assignment after the BankAmerica acquisition had been relatively obscure. He had been charged with running a $2 billion equity investment portfolio that contributed about 7% to BankAmerica's noninterest revenue for the first three quarters of this year.

But Mr. O'Neill has other experience. He was Continental's chief financial officer for two years under the company's former chairman, Thomas C. Theobald. In this position, he was noted for being a tough negotiator during the merger discussions with BankAmerica. It was in these talks in 1994 that he first met Mr. Coulter.

Previously, Mr. O'Neill was chief of staff for former Continental vice chairman Richard L. Huber, where he worked on many of the streamlining moves that Mr. Huber embraced, including selling underperforming businesses, and outsourcing data processing and legal operations.

Earlier in his career, Mr. O'Neill had been a workout specialist for troubled loans to shipping companies, a corporate lending executive in Europe, and a branch manger in London. In the last post, he fought a losing war to keep Continental's funding secure in the Euromarkets before regulators took control of the troubled bank in 1984.

Throughout these assignments, current and former colleagues said Mr. O'Neill proved remarkably adept at handling sticky corporate politics. Not the least of these challenges was acting as go-between for Mr. Theobald and Mr. Huber - two former Citibankers with strong personalities - and the old- guard at Continental, including Mr. Murray.

Mr. O'Neill was also said by colleagues to have developed a solid rapport with regulators, and to be a clear strategic thinker who didn't get too bogged down in the numbers.

"I don't think you'll find anyone who has a mean word to say about him," Mr. Theobald said. Citing Mr. O'Neill's "wonderfully wide experience," Mr. Theobald labeled him an "incredibly smart choice" for the chief financial officer's job.

Mr. Huber, who is now a vice chairman at Aetna Life and Casualty Co., said he expects Mr. O'Neill to lead a streamlining effort at BankAmerica, which would include cost cutting in some business units, and the sale of other underperforming units.

In an interview, Mr. O'Neill acknowledged that such improvements in the bank's operations had "moved to the top of the charts." He also said a big merger was not on the agenda.

Speaking with a deep and gravely voice that seemed at odds with his fair-haired appearance, Mr. O'Neill acknowledged that his route to the CFO's job was not direct.

Coming of age in the 1960s, Mr. O'Neill said he had been an antiwar liberal who wanted to become a lawyer to stay away from the "nasty world of business." He got a bachelor's degree in European civilization from Princeton University in 1969. Rather than risk getting drafted, he decided to enlist as an officer in the Marines, where he did what was described as minor intelligence work.

In the Marines, Mr. O'Neill said he lost his anti-business attitude and "became practical." In 1974, he received a master's of business administration from the Colgate Darden Business School of the University of Virginia, then started his banking career at Continental. request to dismiss a shareholder suit accusing it of fraud.

The suit involves the Farmington Hills-based bank's repurchase of more than two million shares of stock at a price substantially lower than what National Australia Bank Ltd. later agreed to pay in a merger deal.

Judge Anna Diggs Taylor of U.S. District Court for the Eastern District of Michigan ruled there was sufficient evidence to continue the case against the $8.5 billion-asset bank and its top officers.

"Plaintiffs have sufficiently pled allegations of fraud, which, if proven, would also constitute a breach of fiduciary duty by the defendant directors," Judge Taylor wrote.

The suit claims chairman Robert Mylod, chief executive Douglas Ebert, and former chief financial officer Joseph Whiteside violated federal securities laws, breached their fiduciary duties, and committed fraud.

Filed by six shareholders who sold their stock in a restructuring buyback held before the merger, the suit claims management entered into the agreement with National Australia because it allowed the officers to keep their jobs and reap a financial windfall of more than $32 million in stock payments and other options.

Lawyers are seeking class-action status for the suit, which asks for an unspecified amount of financial damages.

Last year, prior to the announcement of the $1.5 billion merger, Michigan National solicited shareholders to sell back stock to the company to aid in the bank's reorganization. But the price of $78 per share was far below the $110 received by shareholders who later sold out to the Australian acquirer.

The suing shareholders charge officers held onto their own stock during the first tender period because they knew they could sell at a higher price later to National Australia.

Bank officials steadfastly denied these allegations. They said it is standard practice for directors not to sell their stock during such auctions because it shows long-term faith in the company.

"The standard in a tender offer is directors don't tender," Mr. Ebert said. "It has nothing to do with any alleged offer from NAB."

Moreover, Mr. Ebert, who was hired two years ago to salvage an ailing Michigan National and became chief executive a month ago, said there were no negotiations between his company and the Australian bank until after the first of this year.

"We have very strongly and very categorically said there were no discussions before Jan. 1, 1995," Mr. Ebert said.

The merger with National Australia also infuriates shareholder William McMaster, who has sued Michigan National in an Oakland County court but is not a plaintiff in the federal suit. Mr. McMaster said Mr. Mylod received a handsome bonus for selling the bank, even though - in the shareholder's view - he was responsible for mismanagement over a 10-year period. Just two years ago, Mr. McMaster said, Michigan National had the worst return on assets among banks above $10 billion in assets, reporting 0.23%.

Mr. McMaster added that as the federal fraud case proceeds, he and other shareholders will present evidence that Michigan National spurned advances made by another banking company that may have given shareholders a better deal.

Mr. Ebert did not deny that the bank had other offers. He added that the bank doesn't plan to appeal Judge Taylor's decision, which was handed down Monday, but will fight back at the next procedural stage.

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