Consultants and accountability: an oxymoron?

January 16, 2009: 12:43 PM ET

ken_lewis__bofa_031In the huge Bank of America (BAC) fiasco/bailout/tailspin, there are a lot of people at whom it would be tempting to wave a wobbly finger. Ken Lewis is taking a lot of heat, and it's not hard to see why. His decision to purchase Merrill Lynch back last fall is looking like the ultimate investment in a money pit. 

This morning it was revealed that during the last quarter of 2008, Merrill lost $15 billion. That's a lot of money. I wonder what their security analysts would have to say about that. They're still publishing their opinions about other companies, for some reason. Perhaps they would care to run some models and offer their views about their own?

Parenthetically, and apropos of very little, I do think it would be a good idea for executives in bad odor with the media, their shareholders, regulators and the public, to update their headshots when the first scent of smoke begins to waft through their hermetically sealed windows. The beamish one of Mr. Lewis, placed next to articles questioning his perspicacity, does him no favors.  Just a thought.

What does fascinate me, however, is the role of the consultants hired to investigate the wisdom of the deal from the shareholders' perspective. As FORTUNE Senior Writer Colin Barr points out elsewhere on this site:

... CEO Ken Lewis' decision to buy Merrill isn't the only thing that looks questionable now. So does the advice he and the BofA board got on the hastily arranged Merrill deal from the bank's advisers, Fox-Pitt Kelton and J.C. Flowers & Co.

The financial advisers offered opinions calling the deal fair to Bank of America shareholders... What's more, the bank's shareholders paid the advisers $20 million for the opinions - which the firms formulated after investigating Merrill Lynch's condition over a single, hectic weekend.

$20 million bucks for... how many hours of work do you think that represented? Let's be generous and say 1000, spread out over a lot of people. That means the firms were being paid $20,000 per hour for their work. That's fine. Everybody has their price, and that was theirs. But don't you think somebody should get a rebate? Do consultants ever give those? Perhaps not. Anway, why should they? They did what was required of them, after all, what is always required of such folks.

They told management what it wanted to hear.

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