NEW YORK (Reuters) - Former Merrill Lynch Chief Executive John Thain defended the acquisition of the brokerage by Bank of America Corp and said the bank knew of Merrill’s losses and bonuses before the merger closed.
In a memo to Merrill employees, Thain also said he plans to reimburse Bank of America for $1.2 million spent to renovate his office a year ago, including a reported $35,115 spent on a commode and $1,405 paid for a trash can. He called the expenses “a mistake in the light of the world we live in today.”
Thain was ousted as Bank of America’s head of global banking, securities and wealth management on January 22, the same day the renovation expenses were disclosed, and just three weeks after the $19.4 billion merger closed.
His insistence that Bank of America understood Merrill’s condition adds pressure on Bank of America CEO Kenneth Lewis, who has been criticized over the 82 percent decline in the bank’s share price since the merger was announced Sept 15. This has fueled speculation about his future as chairman and CEO.
Speaking on CNBC, which also posted the memo on its website, Thain said Bank of America saw “exactly the same information that we saw” during the merger process, and had “complete access to everything that we had.”
He also said Bank of America was “completely plugged into” the amount of discretionary bonuses awarded, and even pushed Merrill to change the ratio of cash to Bank of America stock in the payouts to a 70-30 blend from 60-40.
Merrill awarded the bonuses a few days before the merger closed on Jan 1, much earlier than in past years.
Speaking before the CNBC interview, Bank of America spokesman Scott Silvestri declined to discuss the renovations, and downplayed the bank’s role in setting discretionary Merrill bonuses, which Thain said fell 41 percent from 2007.
“John Thain and the Merrill Lynch compensation committee made the decision on the amount and timing of year-end compensation,” he said. “We had no legal right to challenge it.”
Bank of America has been hit with several lawsuits over its failure in December to disclose Merrill’s losses and talks with the U.S. Treasury Department, which led to a $20 billion capital infusion from the government.
The bank said on January 16 that Merrill lost $15.31 billion in the fourth quarter. It has also said it may cut as many as 35,000 jobs.
Merrill representatives did not return several requests for comment.
Bank of America’s board of directors is scheduled to hold a regular meeting on Wednesday. The bank has declined to discuss Lewis’ job status.
Thain said Merrill’s fourth-quarter losses stemmed almost entirely from positions taken by his predecessor, Stanley O‘Neal, who was ousted in October 2007.
“We were completely transparent with Bank of America,” Thain said. “They learned about these losses when we did.”
As to the renovations, Thain said the office he inherited from O‘Neal did not follow the “general decor” of Merrill’s offices, and that it “really would have been very difficult for me to use it in the form that it was in.”
Thain added, though, that “it was a mistake” to redo the office as Merrill cut costs elsewhere. “I should have simply paid for it myself,” he said.
Bank of America shares closed down 24 cents at $6 on the New York Stock Exchange.
Reporting by Jonathan Stempel; Additional reporting by Jonathan Spicer; editing by John Wallace, Jeffrey Benkoe and Carol Bishopric