The sudden forced resignations of the top two executives at Boston Bancorp Feb. 10 has left area bankers and analysts scratching their heads.
The company's chairman and chief executive, Richard Laine, and its president, Paul Archibald, resigned at the request of the board shortly after board members received a stinging examination report from the Federal Deposit Insurance Corp. Neither executive received severance pay, and the thrift has also canceled their remaining stock options.
Thrift and FDIC officials declined to reveal what the FDIC report said.
Boston newpaper accounts, quoting people close to the situation, suggested that regulators questioned high salaries for the former executives. The newpapers also reported blatant nepotism and conflicts of interest.
But industry experts expressed doubt that such issues alone would lead to top-level ousters, especially at a thriving institution like Boston Bancorp.
"Here you're looking at one of the most profitable banks in New England over time," said James Moynihan, senior vice president of Advest Group in Boston, "but the regulators uncovered something that was not good for the bank or their shareholders, apparently."
Peter H. Hersey, the acting chief executive, said only that Mr. Laine and Mr. Archibald "came to a mutual agreement with the board that it would be in the best interests of all involved for them to no longer be associated with the bank."
None of the FDIC's concerns dealt with the financial safety of Boston, Mr. Hersey said, though he declined to discuss specifics.
Boston Bancorp, with assets of $2 billion, earned $24.6 million in the year ended Oct. 31. It has been designated as a "well-capitalized" institution, despite $26 million in unrealized securities losses for the year.
While it's not unprecedented for the FDIC to involve itself in the affairs of a healthy institution, it's still somewhat unusual for executives to be dismissed from such a company, said Kip Weissman, a bank regulatory lawyer with Silver, Freedman & Taff in Washington.
"It's not legitimate for (regulators) to try to micromanage conflicts of interest and it's even less legitimate for them to micromanage compensation, but they'll look at it, for a healthy institution as well as a nonhealthy institution," he said.
Jeffrey Cohn, bank analyst at H.C. Wainwright in Boston, agreed.
"If you're doing a substantial amount of business with family members, regardless of whether you're public or not, that's something the regulators would want to look at," Mr. Cohn said. "This may not be the first thing the regulators look for, but this example looked pretty blatant."
According to the Boston Globe, regulators questioned whether the company's securities sales were timed to generate huge company profits that would translate into bonuses for the two executives.
In 1993, Mr. Laine received a salary and bonus of $1.47 million, which is more than Bank of Boston Corp. chief executive Ira Stepanian earns. The Bank of Boston is 20 times larger than Boston Bancorp.
The newspaper report said that FDIC also cited nepotism by top officials, commission payments of $1 million to Mr. Archibald's brother for building up the securities portfolio, and lease payments on seven offices to a real estate partnership consisting of bank officials and a corporation controlled by Mr. Laine and Mr. Archibald.