Bank of America, Merrill Lynch and other bank subsidiaries have been sued by a billionaire investor who alleges the bank had a conflict of interest when it represented him while making an investment in the Washington Commanders NFL football team.
Robert Rothman, CEO of Black Diamond Capital in Florida, sued the bank and its subsidiaries last week, alleging that they were representing both him and the franchise at the same time and failed to inform Rothman of improper financial dealings involving the team's former owner, Daniel Snyder.
In addition, Rothman claimed that when in 2021 he and two other minority shareholders wanted to sell their 40% of the team, the bank valued the franchise at $3 billion and their 40% at $875 million, only to value the franchise at more than $6 billion just 18 months later in another sale.
The lawsuit accuses the defendants of breach of fiduciary duty, conspiracy by coercion, negligent misrepresentation, negligence and violations of the Florida Civil Remedies for Criminal Practices Act and the Racketeer Influenced and Corrupt Organization Act (RICO).
BofA senior vice president and media relations executive William Halldin said in an email that the firm “will vigorously defend ourselves against these allegations.” He would not comment on the firm’s internal controls to avoid conflicts of interest between its various business operations.
According to the 45-page lawsuit, filed in U.S. District Court in Tampa, Fla., Rothman first became a client of BofA’s wealth management and family office practice in the early 1990s, and since then the firm has performed a variety of wealth management and investment services for the billionaire, including investments in non-public offerings.
In 2003, the lawsuit said, the managing director of BofA’s sports finance and advisory group, investment banker Elliot McCabe, approached Rothman with a minority investment opportunity in the Washington Commanders franchise. The principal owner at the time, Snyder, owned a majority stake.
In August 2003, Rothman’s $75 million investment for a 10% stake in the Commanders, mostly funded by a BofA loan, was approved by the NFL.
According to the lawsuit, Rothman’s BofA advisor and McCabe had recommended the investment in the Commanders because 10% owners were guaranteed a seat on the franchise’s board.
In March 2005, Rothman purchased half of another investor’s 10% stake for $34 million, bringing his total investment to $109 million for 15.168% of the franchise, of which $100 million was financed by BofA. There was now a total of six board directors: Rothman, majority owner Snyder and two of his family members, and FedEx founder Fred Smith and Dwight Schar, who were also minority owners.
Despite the minority owners collectively having the same board representation as the Snyder family and there being a $20 million limit on how much Snyder could borrow through the franchise without board approval, BofA and Merrill Lynch transacted deals related to the franchise with Snyder alone, including a $55 million loan in 2018, the lawsuit alleged.