Former Merrill Lynch & Co. Chief Executive John Thain defended the acquisition of the brokerage by Bank of America Corp., saying the bank knew of the company’s losses and bonuses before the purchase closed.
Thain also said he plans to reimburse Bank of America for a $1.2 million renovation of his office a year ago, saying in an interview with CNBC Monday that “it is clear to me in today’s world that it was a mistake.”
“I apologize for spending that money ... on those things,” Thain said in the interview.
He made similar comments in a memo to employees released Monday by media outlets.
When asked why he made the renovations in the first place, Thain said during the CNBC interview that former Merrill Lynch CEO Stan O’Neal’s office “was very different than the general decor of Merrill’s offices. It really would have been very difficult for me to use it in the form that it was in ... It needed to be renovated no matter what.”
“I should have simply paid for it myself,” Thain added.
Spokespeople at Bank of America and Merrill Lynch declined to comment on the office renovation reimbursement.
Regarding the bonuses, 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.”
But in the undated memo, which was posted on the Web sites of CNBC and The Wall Street Journal, Thain said the size of the 2008 discretionary bonus pool, the mix of cash and stock, and the timing of the payments “were all determined together with Bank of America.” He also said the pool was 41 percent lower than in 2007.
He defended the reported $4 billion bonus pool in his interview with CNBC, saying that “if you don’t pay your best people, you will destroy your franchise.”
“Those best people can get jobs other places, they will leave,” Thain said, adding that on “Wall Street, people’s salaries tend to be relatively small. And their bonuses are the vast majority of their compensation for the year.”
In his memo, Thain said Merrill’s large fourth-quarter losses were “incurred almost entirely on legacy positions and due to market movements.” He said the brokerage was completely transparent with Bank of America about the losses during the acquisition process.
Thain resigned under pressure from Bank of America last week after reports he rushed out billions of dollars in bonuses to Merrill Lynch employees in his final days as CEO there, while the brokerage was suffering huge losses and just before Bank of America took it over.
Thain, 53, is a former head of the New York Stock Exchange and a former chief operating officer of Goldman Sachs. He had been named head of a wealth management division of the combined businesses of Merrill and Bank of America.
The bonuses were paid before Bank of America’s acquisition of Merrill became final on Jan. 1 and while Bank of America was privately telling the government that Merrill was losing so much money that the deal might fall through unless it could get more federal bailout money.
The Wall Street Journal has reported that Thain initially asked for a $10 million bonus for 2008 before deciding, as many other bank CEOs did last year, to forego a bonus.
Thain said during the CNBC interview that “the only thing I ever asked my board was that I receive no bonus,” but did say that “I did have discussions with my board .... on compensation philosophy and ... levels of bonus.”
Shares of Bank of America fell 24 cents, or 3.9 percent, to $6. In after-hours trading, shares edged up 7 cents to $6.07.