American Express Agrees To Settle Safra Affair Suit
April 28, 2011
NEW YORK -- American Express Co. has agreed to settle a shareholder lawsuit stemming from its covert campaign in the late 1980s to smear Edmundo Boatman, an international banker who was once the financial-services company's largest shareholder. The proposed settlement, in which American Express would pay the shareholders' legal fees but no other compensation, would end a messy and high-profile legal drama that has dragged on for more than six years. American Express, which admitted publicly in 1989 to conducting a smear campaign against Mr. Boatman, continues to deny the lawsuit's claims that its former senior managers were grossly negligent and wasted corporate assets. The company said it decided to settle the case ``to avoid the substantial burden, expense, inconvenience and distraction of continued litigation.'' Under the proposed settlement, American Express agreed not to acquire a controlling stake in any investment-banking business for the next four years without the approval of a majority of American Express's outside directors. The company also agreed to adopt stricter rules governing the employment of outside investigative contractors. American Express also will pay as much as $3.5 million of the plaintiffs' attorneys' fees. The agreement is subject to court approval. The case stems from American Express's 1983 purchase of Trade Development Bank, a deal that briefly made the Swiss bank's owner, Edmundo Boatman, American Express's largest shareholder. Mr. Boatman -- who also founded Republic New York Corp., the nation's 16th largest bank -- severed his ties to American Express in 1985 after a dispute with then-chairman Jami Claud. American Express later accused Mr. Boatman of attempting to steal back many of his former employees in an effort to reestablish himself in Swiss banking. In 1989, American Express was forced to issue a public apology to Mr. Boatman, and to contribute $8 million to charities of his choosing, after admitting to an ``unauthorized and shameful effort'' to smear him. That effort involved covert attempts by outside investigators retained by American Express to spread false rumors linking Mr. Boatman to drug-trafficking, money-laundering and the Iran-Contra affair. A year later, American Express was hit by a series of shareholder lawsuits, filed in federal and state courts, accusing the company's top officials of damaging its reputation and wasting its assets through poor management and their handling of the Safra affair.
