Bank of America, Merrill Lynch and other bank subsidiaries have been sued by a billionaire investor who alleges the bank had a conflict of interest when it represented him while making an investment in the Washington Commanders NFL football team.
Robert Rothman, CEO of Black Diamond Capital in Florida, sued the bank and its subsidiaries last week, alleging that they were representing both him and the franchise at the same time and failed to inform Rothman of improper financial dealings involving the team’s former owner, Daniel Snyder.
In addition, Rothman claimed that when in 2021 he and two other minority shareholders wanted to sell their 40% of the team, the bank valued the franchise at $3 billion and their 40% at $875 million, only to value the franchise at more than $6 billion just 18 months later in another sale.
The lawsuit accuses the defendants of breach of fiduciary duty, conspiracy by coercion, negligent misrepresentation, negligence and violations of the Florida Civil Remedies for Criminal Practices Act and the Racketeer Influenced and Corrupt Organization Act (RICO).
BofA senior vice president and media relations executive William Halldin said in an email that the firm “will vigorously defend ourselves against these allegations.” He would not comment on the firm’s internal controls to avoid conflicts of interest between its various business operations.
According to the 45-page lawsuit, filed in U.S. District Court in Tampa, Fla., Rothman first became a client of BofA’s wealth management and family office practice in the early 1990s, and since then the firm has performed a variety of wealth management and investment services for the billionaire, including investments in non-public offerings.
In 2003, the lawsuit said, the managing director of BofA’s sports finance and advisory group, investment banker Elliot McCabe, approached Rothman with a minority investment opportunity in the Washington Commanders franchise. The principal owner at the time, Snyder, owned a majority stake.
In August 2003, Rothman’s $75 million investment for a 10% stake in the Commanders, mostly funded by a BofA loan, was approved by the NFL.
According to the lawsuit, Rothman’s BofA advisor and McCabe had recommended the investment in the Commanders because 10% owners were guaranteed a seat on the franchise’s board.
In March 2005, Rothman purchased half of another investor’s 10% stake for $34 million, bringing his total investment to $109 million for 15.168% of the franchise, of which $100 million was financed by BofA. There was now a total of six board directors: Rothman, majority owner Snyder and two of his family members, and FedEx founder Fred Smith and Dwight Schar, who were also minority owners.
Despite the minority owners collectively having the same board representation as the Snyder family and there being a $20 million limit on how much Snyder could borrow through the franchise without board approval, BofA and Merrill Lynch transacted deals related to the franchise with Snyder alone, including a $55 million loan in 2018, the lawsuit alleged.
“Defendants and other named and unnamed co-conspirators failed to notify Rothman of the franchise’s improper conduct prior to or after closing the 2018 loan even though Rothman was a client of defendants’ wealth management and family office practice, an owner of the franchise, and a member of all franchise boards,” the lawsuit said, adding that the 2018 loan brought the franchise to its debt ceiling, and it was that lack of available credit that eventually exposed “improper financial dealings.”
In April 2020, with the Covid-19 pandemic disrupting normal franchise business, the franchise told Rothman and the other minority holders that it would not make any investor distributions in 2020 and for the foreseeable future. This affected Rothman in that he was using those distributions to make payments on his $100 million financial loan to BofA, the lawsuit said.
“Although the distributions to Rothman ceased, the franchise paid millions of dollars for Snyder’s personal expenses,” the lawsuit said, including Snyder’s personal airplane and flight crews, an annual $3 million advertising fee paid to Snyder for advertising the franchise logo on the side of that plane, and more than $7 million for Snyder’s yacht, residential property, personal staff, cars and lifestyle expenses.
It was in June 2020, when Rothman and the other minority owners asked BofA and Merrill Lynch for documents pertaining to that 2018 loan—and BofA and Merrill declined without a subpoena—that Rothman first realized there might be conflicts of interest that put him at a disadvantage to the other parties, the lawsuit said.
In October 2020, Rothman and the other minority owners decided to sell their combined 40% stake in the team, a move that was thwarted by Snyder, the lawsuit said.
In a separate action in November 2020, Rothman, Shar and Smith filed a civil suit against Snyder in Maryland that would bar Snyder from interfering with the possible sale. Despite attempts by the Washington Post and the New York Times to have access to those court documents, they remained sealed.
It was in this sale effort that BofA valued the Commanders franchise at less than $3 billion, the lawsuit said. In the end, it was Snyder who bought the minority shares for $875 million in April 2021, only to turn around and sell the entire franchise for more than $6 billion.
In the Snyder minority-stake acquisition, BofA and Merrill acted as lender. And in the Snyder franchise sale, BofA was the lead investment bank, the lawsuit said.
“The sale of the franchise in May of 2023 for $6.05 billion was the culmination of Defendants’ and Snyder’s conspiratorial conduct,” the lawsuit alleged. “Defendants’ actions allowed them to charge substantial fees, make significant profits, and garner great notoriety and market cache by being the lead investment bank for the sale of the franchise.”
Synder sold the team to an investment group led by billionaire Josh Harris, at a time when he was under scrutiny for the loans, other alleged financial improprieties and accusations of sexual harassment against team employees.
Rothman’s lawsuit requested a jury trial, compensatory damages plus treble damages, pre- and post-judgement interest and attorney’s fees and expenses.
