Ex-Merrill chief leaves Bank of America
John Thain, who orchestrated a rushed deal to sell Merrill Lynch & Co. to Bank of America Corp. during the darkest moments of Wall Street’s financial crisis last fall, was ousted from his job Thursday after angering his new bosses.
Thain resigned as brokerage chief of the combined company after a meeting with Ken Lewis, chief executive of Bank of America, who was said to be upset by poor communication about Merrill’s mounting losses and an earlier-than-usual payment of bonuses to employees of New York-based Merrill.
Some on Wall Street dismissed those reasons for the resignation, saying Thain was being made a scapegoat for Bank of America’s intensifying problems, including a $15.3-billion fourth-quarter loss at Merrill, that led the federal government last week to pump an additional $20 billion into the Charlotte, N.C., banking giant.
Whatever the reality, there was no shortage of unflattering new background on Thain, including a report on CBNC that said he spent $1.2 million to redecorate his office early last year, shortly after becoming Merrill’s CEO. The report, which cited company documents, featured an itemized list of furniture including an $87,784 area rug and a $1,405 parchment waste can.
Thain declined to comment.
In an e-mail, Bank of America spokesman Robert Stickler said, “I can confirm that Ken Lewis flew to New York today to talk to John Thain, and it was mutually agreed that his situation was not working out and he would resign.”
Thain, a respected former CEO of the New York Stock Exchange’s parent company and a former top executive at Goldman Sachs Group Inc., engineered the sale of Merrill Lynch to Bank of America in September as Lehman Bros. Holdings Inc. was about to file for bankruptcy and doubt hung in the air about whether once-mighty Merrill might also collapse.
He drew wide praise for the eleventh-hour deal cobbled together over a weekend, under which Bank of America agreed to a stock-swap deal worth $50 billion in September. By Jan. 1, when the acquisition closed, the shares’ value had shrunk to $19.4 billion.
When Thain agreed in October to stay on with Bank of America, there was speculation that he might eventually succeed Lewis.
But the Bank of America CEO lost confidence in Thain after learning of Merrill’s fourth-quarter loss from a transition team integrating the two companies, rather than from Thain himself, according to a person close to the matter.
Lewis also wasn’t satisfied by Thain’s explanation of the losses, the source said.
The Merrill chief also went on vacation to Vail, Colo., when Lewis was asking the federal government for more cash, raising concerns within Bank of America that Thain had “poor judgment” and lacked a sense of urgency in tackling the deep woes afflicting the company, the source said.
It also was revealed Thursday that Merrill had moved up the payment of employee bonuses to days before the merger closed.
Merrill normally paid bonuses in the first quarter, meaning bonus amounts would have been decided by Bank of America under the normal timetable.
Although Merrill was an independent company at the time, Bank of America let Merrill know that it didn’t favor the early payouts, the person close to the matter said.
New York Atty. Gen. Andrew Cuomo is investigating whether the early payouts were improper, according to a person familiar with the matter.
Thain had earlier raised eyebrows by reportedly seeking a multimillion-dollar bonus for himself even as fellow Wall Street chieftains agreed to forgo payouts in recognition of the public furor over the financial crisis. He eventually agreed to no bonus.
“If the three things are true -- not communicating the loss to Bank of America, the huge request for a bonus and redecorating the office -- then he shouldn’t be there,” said Anton Schutz, head of Mendon Capital Advisors in Rochester, N.Y. “That’s just outrageous.”
But other financial veterans said Thain’s departure could deflect increasingly sharp criticism of Lewis from investors, including some who say he paid too much for Merrill.
“Thain is the sacrificial lamb,” said Christopher Whalen, managing director of Institutional Risk Analytics, a financial research firm in Torrance.
Other analysts said Thain, like many CEOs of acquired companies, probably expected to leave at some point.
“If he was looking to keep a job, then yes, he screwed up,” said Dan Alpert, managing director at Westwood Capital, a New York investment bank. “My take is he wasn’t particularly looking” to stay at Bank of America.
--
