NEW YORK (Reuters) -- New York's attorney general issued a subpoena to former Merrill Lynch Chief Executive John Thain Tuesday in a probe into bonuses paid to the firm's employees just days before its takeover by Bank of America Corp .
"The fact that Merrill Lynch appears to have moved up the timetable to pay bonuses before its merger with Bank of America (BAC, Fortune 500) is troubling to say the least and warrants further investigation," Attorney General Andrew Cuomo said in a statement.
Bank of America spokesman Scott Silvestri declined to comment.
Cuomo said his office issued a subpoena seeking testimony from Thain, who was ousted from Bank of America on Jan. 22. Also subpoenaed was Bank of America Chief Administrative Officer J. Steele Alphin, Cuomo said.
Cuomo said his office is conducting its ongoing inquiry into executive compensation practices at companies taking part in the $700 billion financial bailout fund together with the the special inspector general of the federal aid program.
So, I guess that former Merrill Lynch CEO John Thain wanted to hand out big bonuses to his executive cronies before Merrill was taken over by BofA. Bank of America purchased Merrill in an all-stock deal that was worth around $50 billion, and then received another $138 billion in federal bailout money to support Merrill's deteriorating balance sheet. According to the FinancialTimes.com, Merrill Lynch paid out $15 billion for its 2008 compensation, which was 6 percent lower than the total in 2007. The Financial Times also reported that the bulk of the compensation was paid out "as salary and benefits" throughout the year with around $3 to $4 billion paid out in bonuses during December. According to the Financial Times:
Merrill Lynch took the unusual step of accelerating bonus payments by a month last year, doling out billions of dollars to employees just three days before the closing of its sale to Bank of America.
The timing is notable because the money was paid as Merrill’s losses were mounting and Ken Lewis, BofA’s chief executive, was seeking additional funds from the government’s troubled asset recovery programme to help close the deal.
Merrill and BofA shareholders voted to approve the takeover on December 5. Three days later, Merrill’s compensation committee approved the bonuses, which were paid on December 29. In past years, Merrill had paid bonuses later – usually late January or early February, according to company officials.
Within days of the compensation committee meeting, BofA officials said they became aware that Merrill’s fourth-quarter losses would be greater than expected and began talks with the US Treasury on securing additional Tarp money.
Seems to me that Thain wanted to screw both BofA, and the American taxpayer, out of some serious bailout money to enrich his own pocketbook. Why else do you reschedule your bonus payments just days before a huge merger with Bank of America, even when you knew that Merrill Lynch was going bankrupt? According to an April 30, 2008 Forbes list of CEO compensation, John Thain had an executive compensation of around $15.75 million. I guess that wasn't enough money for John Thain.
And then there was the matter of John Thain spending $1.2 million redecorating his office. From Bloomberg.com:
Jan. 23 (Bloomberg) -- John Thain, the former Merrill Lynch & Co. chief executive officer ousted yesterday, spent $1.2 million redecorating his downtown Manhattan office last year as the company was firing employees, a person familiar with the project said.
Thain hired Los Angeles-based decorator Michael Smith, chosen by President Barack Obama and his wife Michelle to redecorate the White House, CNBC reported. Thain paid Smith $837,000 and his purchases included $87,000 for area rugs, $25,000 for a pedestal table and $68,000 for a 19th-Century credenza, CNBC said.
[....]
“Spending company money on a lavish re-do at a time when Merrill’s finances were rocky sends the wrong message,” said Amy Borrus, deputy director of the Council of Institutional Investors. “Thain was compensated well enough to foot the bill himself if he wanted such an upscale redecoration.”
John Thain just exudes arrogance, corruption, and greed. He is arrogant enough to spend $1.2 million in an office redecoration, just as Merrill Lynch was starting to have financial difficulties. Thain's greed is outright, moving Merrill's compensation timetable to just before the Bank of American merger, so he get that last $3-4 billion compensation--before Bank of America realizes that they just purchased a lemon company. Finally there is the corruption. Thain's merger of Merrill Lynch with Bank of America will have terrible consequences for the American taxpayer, as they will be forced to spend $138 billion to clean up BofA's losses due to the crappy Merrill finances. John Thain screwed both Bank of America and the American taxpayer here. And now New York attorney general Cuomo is going after Thain. Let us hope that Cuomo's investigation will end up with some indictments against John Thain.
No comments:
Post a Comment