New York's attorney general issued subpoenas Tuesday to former Merrill Lynch & Co. Chief Executive John Thain and Bank of America Corp.'s chief administrative officer, J. Steele Alphin, amid an investigation into bonuses that Merrill paid executives just before it was sold to Bank of America.
Thain, 53, was serving as head of the newly combined company's wealth management division before he resigned last week. The resignation came shortly after reports surfaced that billions of dollars were paid to Merrill executives in late December.
Those bonuses were paid as Merrill was about to report a $15-billion fourth-quarter loss, and while Bank of America was seeking more federal funds to help it absorb the mounting losses at the New York-based investment bank.
Atty. Gen. Andrew Cuomo's investigation will try to determine why the timetable for paying the bonuses was moved up to December from its normal period in January; who knew about the bonuses; and how Merrill could justify spending billions of dollars on bonuses knowing it was on the brink of reporting a multibillion-dollar loss for the quarter, a person familiar with the probe said. The person spoke on condition of anonymity because the probe is ongoing.
Bank of America has said in recent days it knew about the bonuses but had no authority over the payout because the Merrill purchase had not been completed. On Monday, 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."
Charlotte, N.C.-based Bank of America did not immediately return calls seeking comment about the subpoenas.