April 18, 2001

Protestors, Profits Do Not Stop FleetBoston Shareholders Meeting

By Lisa Biank Fasig

Angry protestors and declining profits could have marred the annual meeting of FleetBoston Financial Corp. yesterday, the last time Terrence Murray addressed shareholders as the company's chief executive.

But thanks to a few well-placed, customer-friendly vows by Murray, and the continued prosperity of some shareholders, the CEO ended up earning a standing ovation. Murray is expected to retire at the end of the year, handing the reigns to Charles Gifford, president and chief operating officer.

The meeting didn't start out so upbeat. In the hour before, about 100 consumer advocates and Fleet customers in yellow "loan shark" T-shirts toted anti-Fleet signs and hurled insults at the doorstep of the meeting at the World Trade Center. Their claim: that the bank invades customer privacy.

The protests stem from a December lawsuit filed by the Minnesota attorney general. The suit alleges that Fleet Mortgage shared personal customer information with telemarketers and participated in deceptive programs to charge fees to consumers. Fleet Mortgage is in the process of being sold to Washington Mutual of Seattle.

"They set the standard in predatory lending, stealing people's homes. Then they set the standard with predatory fees, they're the highest fees in the country. Now they are going to be known as the number-one predatory privacy invasion bank," said Bruce Marks, chief executive of Neighborhood Assistance Corporation of America, a consumer watchdog group and long-time thorn in FleetBoston's side.

The group, also called NACA, is following Minnesota's lead and considering a class action lawsuit against FleetBoston.

NACA's mission yesterday was to be heard inside the annual meeting, and to have Murray respond to their complaints. They accomplished both. At the meeting, they served Fleet with a demand letter giving the company 30 days to change its policy and make customers whole. Specifically, they are seeking $ 1,000 per customer per unauthorized information release.

In the bank's defense, Murray said FleetBoston has not participated in such programs in almost two years.

"In '99 and before, there were sales of lists. Those sales have stopped," Murray said, drawing applause. "We have stated that we will not sell or share any information with a third party without direct authorization from the consumer."

The pledge fit tongue-and-groove with promises by FleetBoston to become more "customer-centric" and apply lessons learned from the "pitfalls of integrating two major financial institutions," namely, Fleet and BankBoston.

In that context, the company also said it would not be pursuing major acquisitions this year.

"It's critical that we create an environment in which we demonstrate that we are easy to do business with," said Gifford. "That we care about each customer, are responsive to his or her concerns, and solve problems quickly."

After the meeting, Murray said FleetBoston would take NACA'S demand letter seriously "to the extent that there are any valid issues raised, we are obligated to look into it."

The Minnesota suit charges that Fleet Mortgage and telemarketers led customers to believe they were receiving free trial memberships to clubs that offered discounts on services such as lawyer fees and auto services. Customers' mortgage accounts were charged if they did not opt out of the programs in 30 days.

One Fleet Mortgage customer at the meeting held up her monthly mortgage statement, which included a $ 12.95 charge for "optional products."

"I have no idea what the services are for," said the customer, Angela Perry, of Roxbury, Mass.

Yesterday's hubbub did help overshadow a cloudy earnings report.

New England's largest bank delivered on earlier warnings of lower profits and said its first quarter net earnings fell to $ 142 million, or 12 cents a share, from almost $ 1.1 billion, or 97 cents a share, in the previous year's quarter.

The recent quarter includes $ 725 million in charges related to corporate restructuring, including merger costs stemming from the acquisition of Summit Bancorp and a loss from the sale of Fleet Mortgage. The 2000 quarter included $ 150 million in gains from the sale of properties to Sovereign Bancorp.

Excluding the charges and gains, FleetBoston's earnings were $ 870 million, or 79 cents a share, compared with $ 927 million, or 84 cents a share, a year before.

The bank saw a $ 400 million decline in its investment banking businesses.

"Clearly the halcyon days of the 1990s are over," said Chief Financial Officer Eugene McQuade. But, he added, "The balanced, diversified franchise that we put together did a good job in weathering the storm."

Shares in FleetBoston declined 79 cents yesterday, to close at $ 38.21.

After the meeting, Marks and his associates seemed more diplomatic about FleetBoston's intentions.

"It really does not sound like there's a need to move toward litigation if the words out of Mr. Murray's mouth were in fact genuine," said the Rev. Graylan Hagler, development director of NACA.

But NACA is not about to hang up its gloves. If Fleet does not respond, Marks said the group will pursue class action status.

They might not stop there. NACA said it has also gathered personal information on Murray, including Social Security, boat license and gun registration numbers. They are keeping the information private for now, but will "reconsider" Marks said, if FleetBoston does not change its practices.

This article is reprinted here for non-commercial, educational, fair use purposes only.