BAC Bank of America Corporation

By Rob Copeland and Rachel Louise Ensign 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (March 1, 2018).

Bank of America Corp. fired two employees in its hedge-fund-focused prime-brokerage unit as it expands an investigation into potential sexual misconduct in the division, people familiar with the matter said.

The bank fired the employees after determining they interfered with the probe of alleged inappropriate behavior by Omeed Malik, until recently one of the top executives in the unit, the people said. The fired employees, Valerie Ludorf and Joe Voboril, were earlier placed on leave, they said.

Mr. Malik was fired in January in the wake of complaints from female employees about unwanted advances, The Wall Street Journal earlier reported.

The bank said in a recent Financial Industry Regulatory Authority filing that Mr. Malik was "discharged [for] personal conduct in violation of firm standards, including interfering with the firm's review of the matter."

Bank officials believe Mr. Malik and others sought to throw off the investigation by trying to coordinate the stories employees told internal investigators about his behavior, according to the people. This conduct allegedly included a history of pursuing relationships with subordinates, the people said.

Marc Kasowitz, an attorney for Mr. Malik, said "Mr. Malik has not engaged in any sexual harassment and has not interfered with Bank of America's review of the matter. Any allegation that he did so is false. The bank was presented with compelling evidence from multiple employees that the accusations against Mr. Malik were not credible, and the bank chose to ignore and suppress that evidence, moving instead to destroy Mr. Malik's career."

The attorney added, "The bank's actions against Mr. Malik, who is of Middle Eastern descent, were part of a pattern of discrimination in which white males at the bank have been protected and rewarded."

An attorney for Mr. Voboril said her client cooperated fully with the bank's investigation and didn't interfere. "The firm never alleged that Joe committed any misconduct" before it terminated him, said the attorney, Kim Michael. "We believe this is part of Bank of America's attempt to discredit anyone whose truthful answers didn't fit into their narrative."

Ms. Ludorf didn't respond to requests for comment.

A Bank of America spokesman said the employees no longer worked at the bank.

The firings represent a new phase of Bank of America's probe into its prime-brokerage business. This unit encompasses employees world-wide who pitch hedge funds and other so-called institutional clients to pay the bank for trade execution, leverage and other services. Investment banks vie fiercely for the business as a means of introduction to deep-pocketed customers who may later use other services like wealth management.

Bank of America historically struggled to compete with rivals like Goldman Sachs Group Inc. and Morgan Stanley in prime brokerage. Top executives tried to expand the unit in the wake of the financial crisis after agreeing to buy Merrill Lynch, which had a lucrative prime-brokerage arm.

In recent years, the division has been home to allegations of misconduct, according to current and former employees.

These people said some in the unit were uncomfortable when they heard a male executive -- who remains with the bank -- had told fellow employees that he attended the filming of a pornography video during a business trip to California. He visited the shoot in his spare time, in the backyard of a friend's house, one of the people said.

When the executive returned, he showed pictures from the shoot to some colleagues in prime brokerage, including some of the top executives in the unit, current and former employees said.

Mr. Malik, a former lawyer at white-collar firm Weil, Gotshal & Manges LLP, was hired in 2012 to help generate business for the unit from up-and-coming hedge funds. Bank of America within about two years began receiving complaints about him, current and former employees said.

In one instance, a female prime-brokerage employee notified human resources that Mr. Malik had attempted to start a romantic relationship with her, which she rebuffed, people familiar with the matter said. In the complaint, she said she believed that interaction negatively affected her career, the people said.

She subsequently left the bank, people familiar with the matter said. It isn't clear whether Bank of America acted on her complaint. The bank declined to comment on the matter.

Mr. Kasowitz, Mr. Malik's lawyer, said, "Mr. Malik wasn't in any position to affect this employee's career, advancement, compensation or day to day responsibilities."

Mr. Malik in recent years was promoted several times, most recently to global head of capital strategy, a position that involved staff around the world reporting to him.

He continued to pursue a series of relationships with subordinates through last year, current and former Bank of America employees said.

The bank's personnel policy states that personal relationships among employees in which one has influence over another can lead to "real or perceived conflicts of interest" and "should be avoided when possible."

At the end of 2017, one of Mr. Malik's subordinates filed a complaint with human resources about an unwanted advance, the Journal earlier reported. On Jan. 9, Mr. Malik was fired by the bank, according to the Finra record.

Write to Rob Copeland at rob.copeland@wsj.com and Rachel Louise Ensign at rachel.ensign@wsj.com

(END) Dow Jones Newswires

March 01, 2018 02:47 ET (07:47 GMT)

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