sacked its finance chief and bid adieu to its CEO as the mortgage lender seeks to put an accounting scandal behind it.
The San Juan, Puerto Rico, finance company named John Ward interim CEO effective Sept. 15, replacing longtime leader Salomon Levis. Doral said Levis' brother David resigned as director emeritus, and treasurer Mario Levis agreed to resign, effective Friday.
Salomon Levis' sister, Zoila Levis, was named vice chairman and will keep her president and operating chief posts. But Doral fired finance chief Ricardo Melendez, and named Lidio Soriano interim chief financial officer on an interim basis. Doral named Julio Micheo treasurer.
Doral said a report from outside counsel pointed to the need for change at the top of the bank.
"After receiving a report from Latham & Watkins LLP, independent counsel for the outside directors of the board, the board determined that these management changes are in the best interest of the company as it proceeds to resolve the issues raised by the need to restate its financial statements as announced on April 19, 2005," Doral said in a press release late Friday.
In April, Doral it would restate earnings by as much as $600 million because of continuing problems with its use of interest rate-only strips, a special type of security, to hedge its mortgage portfolio. The next day, the
Securities and Exchange Commission
said it would take a look.
The restatement delayed the release of Doral's first-quarter earnings. The bank said at the time that the outside directors on its board had hired Latham & Watkins to "review the facts and circumstances relations to the IO valuation issues."
Problems with Doral's derivatives portfolio surfaced early this year, when the bank reported fourth-quarter earnings for 2004. At that time, Doral took a $97.5 million pretax impairment charge on the securities, which are used to hedge the value of its portfolio against fluctuations in interest rates and to record gains of the sales of some of those mortgages. Doral's management, in a January conference call, downplayed the impairment charge, denying the bank had suffered any problem with its hedging strategy.
In July, Doral named Ward, 59, nonexecutive chairman as it sought to focus Salomon Levis' energies on building the bank's franchise.
On Monday, Doral shares fell 66 cents to $13.84.