Former Merrill Lynch & Co chief executive John Thain defended the acquisition of the brokerage by Bank of America Corp, saying the bank knew of the company’s losses and bonuses before the purchase closed, according to media reports on Monday citing an internal memo.
In the memo to Merrill Lynch employees, Thain also said he plans to reimburse Bank of America for a US$1.2 million renovation of his office a year ago, calling the cost “a mistake in light of the world we live in today.”
Spokespeople at Bank of America and Merrill Lynch declined to comment on reports of the office renovation reimbursement.
Regarding the bonuses, Bank of America spokesman Scott Silvestri said: “John Thain and the Merrill Lynch compensation committee made the decision on the amount and timing of year-end compensation at Merrill Lynch. We had no legal right to challenge it.”
But in the undated memo, which was posted on the Web sites of CNBC and the Wall Street Journal, Thain said the size of last year’s discretionary bonus pool, the mix of cash and stock, and the timing of the payments “were all determined together with Bank of America.”
He also said the pool was 41 percent lower than in 2007.
Thain also said Merrill’s large fourth-quarter losses were “incurred almost entirely on legacy positions and due to market movements.”
He said the brokerage was completely transparent with Bank of America about the losses during the acquisition process.
Thain resigned under pressure from Bank of America last week after reports he rushed out billions of dollars in bonuses to Merrill Lynch employees in his final days as CEO there, while the brokerage was suffering huge losses and just before Bank of America took it over.