A former NationsBank broker was suspicious of the mutual funds she continued to sell. She ended up paying a price.
When she was a securities broker in Florida for NationsBank Corp. in the early 1990s, Catherine Hovis knew that the elderly clients to whom she was selling mutual funds did not have the financial or emotional means to take on risky investments. One couple, both in their 70s, were living on Social Security and wanted something as safe as a certificate of deposit but with a better return _ maybe 7 percent to 8 percent.
Hovis convinced the couple that the bank's mutual funds were safe and, at her bosses' urging, reassured them they had made a smart investment even after the value of the funds declined.
Today, Hovis, 43, acknowledges that she had begun to suspect the mutual funds were not as solid as bank management had led her to believe. Yet, she continued to sell them to risk-averse elderly clients because, she says, she was doing what her bosses told her to do. She also was motivated by her supervisor's praise, a six-figure salary, financial bonuses and a free trip to the Cayman Islands, becoming one of the top 25 sellers of the funds for NationsBank, now Bank of America.
"Money makes people do very strange things," Hovis said. "As a single mother, I was willing to do what I had to do." Besides, she added: "I'm human. I wanted to be a team player."
The practice of pressuring the elderly to buy mutual funds, which Hovis said was pervasive throughout the bank, led to a $29-million class-action settlement by NationsBank in 1997 with people who had been sold the funds. Despite the settlement, the bank vigorously denied the assertions in the suit. Bank officials declined to comment on Hovis' assertions.
As she describes it, her moral plight was unusually stark. But the basic choice she faced between her paycheck and her principles is one that most workers eventually encounter. And with hordes of people now fixated on stock market riches and million-dollar game shows, ethicists warn that ordinary Americans are having an even harder time holding on to their moral bearings.
Hovis is trying to make amends. "I paid for the blood money," she said, fighting tears. "All the calls and cries for help" from clients gave her sleepless nights, she said, and led to occasional heavy drinking.
She decided in 1994 she did not want to sell the funds anymore and soon left the bank. Since then, she said, she has cooperated with federal and state regulators, including testifying to the Securities and Exchange Commission.
On top of the $29-million class-action settlement, in 1998 NationsBank agreed to pay $6.75-million to settle charges by the SEC and other regulators that it had misled investors about their investment risks. NationsBank neither admitted nor denied wrongdoing.
"It's the least I can do to repay my part of what I did," said Hovis, who is now trying to make a career out of teaching financial education. "When I'm dead and gone, at least my son will say, "My mom tried.' "