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Thain 'Surprised' By Firing, Says BofA Knew Of Losses
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Former Merrill Lynch CEO John Thain told CNBC he was surprised to be let go just 20 days after the merger with Bank of America, and said BofA was aware of the reasons why Merrill reported a loss of $15 billion in the fourth quarter.
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AP |
In a taped interview to be broadcast at 4:15 pm EST today, Thain said BofA saw the same profit and loss reports that Merrill execs saw, and that the bank was totally aware of the losses.
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Thain blamed the size of the $15 billion loss on investments made by his predecessor, Stanley O'Neal, whom he had replaced at Merrill a year ago.
Those legacy positions, he said, had weakened in the last three months. Thain also said that he had not added to those risky positions during his tenure at Merrill.
Thain also stood by the bonuses paid out to top executives at Merrill Lynch shortly before the merger with BofA closed on Jan. 1, saying even in troubled times you have to "pay" to keep top talent. He said the bonuses were lower than ones paid out in 2007.
- Watch Maria's Full Interview With Thain on CNBC.com at 4:15 pm EST
Thain's insistence that Bank of America knew the extent of Merrill's condition puts added pressure on Bank of America CEO Kenneth Lewis, who has been criticized over the bank's falling share price, increasing speculation about his future as chairman and CEO.
Bank of America spokesman Scott Silvestri said today that, "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."
Thain's interview came the same day that CNBC obtained a memo Thain sent to Merrill Lynch employees saying the acquisition of the brokerage giant by Bank of America was the right thing despite the huge losses.
Video: Maria Bartiromo reports on her interview with Thain. The full interview will be posted on CNBC.com and air on CNBC at 4 p.m.
Thain also said he'll reimburse Bank of America for the $1.2 million renovation of his office last year, which sparked controversy last week after it was reported by CNBC.
The renovation expenses, including a reported $35,115 commode and a $1,405 trash can, have become the latest symbols of corporate excess.
News of the expenses surfaced on January 22, the same day Thain was ousted as Bank of America's head of global banking, securities and wealth management, and just three weeks after the $19.4 billion merger closed.
Thain characterized the renovation of his Merrill Lynch office, conference rooms and a reception area as "a mistake in the light of the world we live in today," although the costs were incurred more than a year ago "in a very different environment."
Thain also said in the memo the media had inaccurately reported his company's year-end bonus payments. He said the 2008 bonus pool was 41 percent lower than 2007, and the pool was substantially smaller than the merger agreement permitted.
He did not specify how those comments differed from media reports.
On the subject of last year's "large and unfortunate" fourth-quarter losses, Thain blamed "legacy positions" and " market movements."
He said he had been "completely transparent" with Bank of America [BAC
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], and pointed out that the acting chief financial officer of his businesses had been Bank of America's chief accounting officer.
"They learned about these losses when we did," he wrote. "The acting CFO of my businesses was Bank of America’s former Chief Accounting Officer. They had daily access to our (profit and losses), our positions and our marks. Our year end balance sheet target (which we more than met) was given to us by Bank of America’s CFO."
Bank of America has been hit with several lawsuits over its failure in December to disclose Merrill losses and talks with the U.S. Treasury Department, which led to a $20 billion capital infusion from the government.
The board of the Charlotte, North Carolina-based bank is scheduled to meet on Wednesday
—Reuters contributed to this report.
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