Cuomo subpoenas Thain on Merrill bonuses

New York Attorney General Andrew Cuomo intends to grill former Merrill Lynch & Co. Inc. Chief Executive John Thain regarding the $4 billion in bonuses paid to the company’s employees before the end of last year.
Mr. Cuomo said today that he has subpoenaed Mr. Thain, who resigned from Bank of America Corp. last week, requiring him to further discuss the bonus payouts that occurred shortly before Merrill was formally acquired by BofA.
“The fact the Merrill Lynch appears to have moved up the timetable to pay bonuses before its merger with Bank of America is troubling to say the least and warrants further investigation,” Mr. Cuomo said in a statement.
A subpoena was also issued to Steele Alphin, Charlotte, N.C.-based BofA’s chief administrative officer, to offer testimony on the subject.
BofA spokesman Scott Silvestri declined to comment on the subpoenas.
For his part, Mr. Thain contends that the bonuses were appropriate, despite the fact that New York-based Merrill lost more than $15 billion in the fourth quarter and about $27 billion in 2008.
In an interview on CNBC yesterday, he acknowledged that it is a “fair question” as to why Merrill’s employees should receive such significant payouts considering the firm’s performance and in the light of the newly combined company’s need to tap the federal government for about $45 billion in bailout money.
But the losses, Mr. Thain said, where concentrated primarily in mortgage and credit assets, and employees in the firm’s other businesses — such as its investment banking and financial advisory units — deserved their bonuses for 2008.
Otherwise, he said, BofA runs the risk of losing some of its most talented employees in these businesses.
“You have to believe that there’s value in the franchise,” Mr. Thain said. “If you don’t pay your best people, you will destroy the franchise.”

Related Topics: Merrill Lynch