Tuesday, December 9, 2008

Bank of America agrees to pay extortion in Chicago

Although it still seems to remain true that Bank of America does not have any obligation to extend lending to a failed Chicago firm whose ex-workers are demanding severance and vacation pay -- from the bank, the bank did in fact decide to "loan" the company enough money to pay off the workers. Yes, the workers are owed the money by the failed company, but BofA does not have any legal oblogation here. The governor of Illinois threatened to withold future state business from the bank if they did not comply with his extortion demand. Curiously, this same governor was in fact arrested toay for... extortion, demanding that companies make donations to him in exchange for state business and possibly even appointment to be the replacement for Senator Barack Obama.

BofA had little choice in this matter. Sure, they could have fought it and even won, but that would have been a classic Pyhrric victory and a public relations black eye. By caving and agreeing to "loan" the extortion demands, they can come out of this looking like the "good" guy, or at least a "victim" of Chicago politics.

Worst case, two months severance pay and, say, a month of vacation pay for 300 workers earning, say, $50,000 per year, comes out to about $3.75 million. That is chump change for BofA. It is a bad precedent, but it probably is their best option, and maybe that is simply the cost of doing business in this economic climate.

-- Jack Krupansky

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