BofA Tries to Stem Merrill Defections in London

Bank of America has more than just New York Attorney General Andrew Cuomo to worry about.

CNBC has learned that Brian Moynihan, who replaced former Merrill Lynch chief John Thain as head of the investment banking subsidiary after BofA's merger with Merrill last year, has made what one person at Merrill described as an "emergency trip" to Merrill's London office. The reason: to stem a possible flood of defections of investment bankers, including the head of the international investment bank, Andrea Orcel.


Aside for his dealmaking abilities, Orcel has recently gained a level of fame for earning a $33.8 million bonus in 2008 and attracting the attention of Cuomo. The Attorney General has widened his investigation into the massive bonuses handed out to Merrill executives before its merger with Bank of America was completed, and more importantly, before Merrill announced a $15 billion loss that forced Bank of America CEO Ken Lewis to seek an emergency bailout from the federal government.

As reported by CNBC, Cuomo has expanded his inquiry to include whether senior Merrill executives, including Thain, moved up the timing of the bonus payout to occur before the losses were announced.

Thain denies any wrongdoing, but Cuomo is now calling on senior executives at the firm to explain the motivation behind the timing of the bonuses. Orcel, for his part, will meet with Cuomo's investigators in early April, according to people close to the inquiry.

Orcel, however, isn't worried so much about Cuomo (a person close to Orcel say he wasn't in the loop on timing). Instead, he and his team of investment bankers are in a simmering culture clash with Bank of America. According to people close to Orcel, he's weighing his future at the newly combined firm, as are many of the senior managers of his investment banking team.

Losing Orcel and his team would be a major blow to Bank of America. The firm purchased Merrill mainly for two reasons: Merrill's massive brokerage sales force that deals with investors across the country selling stocks, bonds and mutual funds, and its international investment banking footprint. Much has been made of Orcel's 2008 bonus, what what is often left out has been his contribution to Merrill's bottom line, $550 million in revenues.

A spokesman for Bank of America had no comment on the meetings, other than to say they were scheduled about a week ago so Moynihan could get to know Orcel and his team. Orcel could not be reached for comment.

Merging banks like BofA and investment banks is always messy. Commercial bankers and investment bankers often call on the same clients and approach the business differently. In the case of Orcel and his team, Bank of America executives have offered conflicting investment advise than what they were telling clients.

Adding to the tension between big producers like Orcel and US based banks has been the growing sentiment against handing out bonuses to top producers on Wall Street. Congress has been pressuring banks, like Bank of America, that have accepted bailout money to scale back on bonuses. Cuomo's investigation into the Merrill bonuses is also having a chilling effect.

A House of Representatives proposal to massively tax bonuses from banks was easily approved today, and Wall Street executives believe similar measures will continue to crop up making it difficult for those banks to keep talent, who will flee to foreign banks that haven't accepted government bailout money.