The War Between an Analyst and a Bank
"Anyone who is forced to settle in a case like that increases the chances that a combative C.E.O. will sue the next analyst who challenges him."
Although Mr. Levan said in an interview that his bank didn’t apply for federal bailout money during the financial crisis, the bank’s own financial filings show that it did apply. Asked about this, Mr. Levan sent an e-mail clarifying the matter: “We filed an application to keep our options open but withdrew it prior to the time it was acted upon. At no time did we ever make a determination to accept federal monies.”
In February this year, Mr. Levan approached some of BankAtlantic’s debt holders and asked them to sell their securities back to the bank for 20 cents on the dollar. Investors balked, led by a New York hedge fund called Hildene Capital Management.
“In light of BankAtlantic’s protests of any criticism of its performance, its current proposal seems out of step with its fanatical defense of its financial condition,” wrote John Scannell, chief operating officer of Hildene, in a February letter. “For example, BankAtlantic seemed so concerned with any implication that it was experiencing distress, it sued noted banking analyst Dick Bove in 2008.”
Instead of asking the debt holders to accept a discount, Mr. Scannell says he suggested that Mr. Levan and his son take big pay cuts. Mr. Levan says he doesn’t recall details of his conversations with Hildene, but says the firm didn’t influence his decision to ultimately give up on the debt exchange offer.
Last month, a federal judge in a shareholder lawsuit against BankAtlantic’s holding company questioned Mr. Levan’s integrity, ruling that Mr. Levan had made false statements in 2007 about the extent of bad loans. The plaintiffs argue that Mr. Levan did so intentionally in order to artificially bolster the stock price.
Mr. Levan denies that accusation and doesn’t agree with the judge’s assessment, either, but on Thursday the judge turned down Mr. Levan’s request to reconsider the matter. The case is pending.
Mr. Levan, meanwhile, is dueling with investors of other companies in which his company owns stakes — Benihana, the restaurant chain, and Woodbridge Holdings, formerly known as the Levitt Corporation, the home builder famous for building Levittown on Long Island.
BankAtlantic entered into settlement talks with Mr. Bove in his case in March. In the case, Mr. Levan said Mr. Bove’s report had damaged the bank’s reputation.
But “at the end of the day, that may not have been a strong case for them,” says Thomas F. Holt Jr., a lawyer for Mr. Bove. If the case had gone to court, Mr. Holt said, he planned to counter BankAtlantic’s argument by putting the bank’s reputation on trial.
Mr. Levan disagrees with that assessment. “There was nothing Mr. Holt said he was going to say or do that had any bearing on our view of the case against Mr. Bove,” he says.
MR. LEVAN says he and BankAtlantic got exactly what they wanted out of the lawsuit against Mr. Bove. As part of the settlement, Mr. Bove issued a statement reiterating that his rankings didn’t include BankAtlantic. (But they did include its holding company.)
Yet Mr. Levan may not have won everything he sought. For one, he said the bank did not sue Mr. Bove for money; however, e-mails from BankAtlantic’s lawyer show that the company sought as much as $650,000 from the analyst. In addition, BankAtlantic had sought a much more strongly worded statement than Mr. Bove ultimately issued, the e-mails show.
Regardless, Mr. Levan remains upbeat about his bank. He and his son rang the bell at the New York Stock Exchange last month, and Mr. Levan contends that his company is “a fantastic banking story of a bank that really did extremely well in this recession.”
Mr. Bove, meanwhile, says his feud with Mr. Levan was mostly dispiriting. He’s particularly frustrated with government regulators, whom he believes ignored red flags at BankAtlantic for years.
As he continues to churn out opinions about bank stocks, Mr. Bove says he has no intention of opining on BankAtlantic Bancorp again. Nothing personal, he says, but the banking company is simply too small to interest his clients.
“It’s a purely economic decision,” he says.