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Bank Of America Signs Up With Donald Sterling For Millions- Will This Taint BAC Like Bernie Madoff Taints JPM?

|About:Bank of America Corporation (BAC) Includes:JPMorgan Chase & Co. (JPM)

BAC Gets Paid Huge to Help Sterling

Donald Sterling, the owner of the Los Angeles Clippers, has been permanently banned by the National Basketball Association (NBA) after making outrageous racist comments that were captured in a recorded conversation.

The commissioner of the NBA, Adam Silver, expressed his outrage over the racist remarks, denied Mr. Sterling access to any NBA events, fined him $2.5 million, the highest amount allowed by NBA regulations, and said that he is willing to do everything in his power to force him to sell his franchise.

Mr. Sterling is not allowed to attend any NBA practices or games or show up at any Clipper's facilities, including their offices. He is also forbidden to make any decisions about players or negotiate any business related to the team. Moreover, he cannot take any part in anything to do with the league.

The $2.5 million fine will go to a variety of organizations that are focused on promoting racial and group tolerance and anti-discrimination. The particular organizations will be decided by a joint selection consisting of the league and the players' association.

The NBA is currently awaiting Mr. Sterling's response to its lifetime ban and maximum fine. A hearing on June 3rd and a vote by the Board of Governors in New York will decide whether or not to terminate his ownership. If this happens, the league would take over complete control of the franchise, including deciding on its sale.

A league investigation on a recently released inflammatory audiotape traced the voice making the racist remark back to Mr. Sterling. The recording was made in September last year. When asked about it, Mr. Sterling acknowledged that it was his voice. V. Stiviano, the beautiful young woman who spoke on the recording, and a third person who was present in the room when the recording was being made all cooperated with the league's investigation into the details of the people involved in the recording. At the time of the recording, Mr. Sterling was fully aware that a record of the conversation was taking place.

Sterlings Retains Bank of America to Sell the Clippers

In the meanwhile, Mr. Sterling's wife, Shelly Sterling, is negotiating the sale of the Clippers for herself and Donald and has hired Bank of America (NYSE:BAC) to handle the details of the sale of the franchise. The sale could result in millions in fees for BAC.

The sale could be one of the most profitable in league history, which would help Bank of America, earn a huge fee for brokering the deal. The sale of the Clippers is expected to be around a billion dollars. Adding to the chance of a profitable sale is the bidding frenzy, stirred up by competing big-ticket buyers.

At present, there are six serious groups interested in buying the Clippers, including Steve Ballmer, Microsoft's (NASDAQ:MSFT) retiring CEO; Dr, Patrick Soon-Shiong, a billionaire surgeon, whose net worth, according to Forbes magazine is $9.9 billion; and Oprah Winfrey.

Another ownership group is in formation, consisting of Grant Hill, a former Clipper, Tony Ressler, and Bruce Karsh. Additionally, Larry King, the iconic television interview, has expressed an interest in joining one of the groups bidding on the Clippers.

Shelly Sterling, pressed by the looming deadline, has to sell the team quickly to control the sale, and it is not clear if things will move as quickly as she hopes. Donald Sterling agreed to let his wife negotiate the sale of the team last week to avoid legal problems with the sale. The NBA has publicly declared that it fully intends to terminate the Sterling's ownership of the team and would not allow either husband or wife to retain any ownership interest in the team.

What This May Mean For Bank Of America Shareholders

Given the huge problems and billion dollar fines that Bank Of America has incurred over the past year, we believe BAC should avoid clients like Donald Sterling. It does not appear to us that BAC management is using good judgment in associating themselves with Donald Sterling.

J.P. Morgan (NYSE:JPM) is still reeling from their association with Bernie Madoff and has to live with that legacy.

We continue to believe that BAC shareholders should continue to take profits in this megabank.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Stocks: JPM, BAC