Thain subpoenaed as probe into Merrill widens
NEW YORK (Reuters) - New York's attorney general has subpoenaed former Merrill Lynch & Co Chief Executive John Thain and Bank of America Corp Chief Administrative Officer J. Steele Alphin to testify about bonuses paid to Merrill executives a few days before the company's takeover by Bank of America.
Andrew Cuomo, the attorney general, is also examining the timing and adequacy of disclosures by Bank of America about Merrill's mounting losses, a person familiar with the matter said. The person requested anonymity because of a lack of authority to discuss the probe.
Bank of America spokesman Scott Silvestri declined to comment. The company has said it had "no legal right" to challenge Merrill's bonus payouts. A spokesman who said he represented Thain also declined to comment.
Cuomo's probe adds to pressure on Lewis, who ousted Thain as head of global banking, securities and wealth management on Thursday and is facing calls from some investors, analysts and commentators to resign from the largest U.S. bank by assets.
This month, Bank of America also saw the departures of two Thain deputies, Robert McCann and Greg Fleming. It also took $20 billion of government capital to help it absorb losses at Merrill, which were far higher than it had previously expected, and slashed its quarterly dividend to a penny per share.
The bank paid about $19.4 billion for Merrill in the January 1 merger. On January 16, Bank of America said Merrill had lost $15.31 billion in the fourth quarter.
It was not immediately clear whether Lewis might eventually also be subpoenaed. The board of directors of Charlotte, North Carolina-based Bank of America is scheduled to hold a regular meeting on Wednesday.
EARLY BONUSES
Merrill paid its reported billions of dollars of bonuses in late December, rather than wait until the new year as it had in the past.
"The fact that Merrill Lynch appears to have moved up the timetable to pay bonuses before its merger with Bank of America is troubling to say the least," Cuomo said in a statement.
On Monday, Thain took to the airwaves to defend the merger and the bonuses. He said on CNBC television that Bank of America was "completely plugged into" the bonus process, even directing how much was to be awarded in cash and stock.
In a memo posted on CNBC's website, Thain also contended that Merrill was "completely transparent" in its dealings with the bank before the merger closed, and that the Merrill bonus pool was 41 percent lower than in 2007.
Cuomo is working with Neil Barofsky, the special inspector general of the federal government's $700 billion Troubled Asset Relief Program, to examine executive pay at lenders that receive TARP capital. Bank of America got $25 billion last year and the additional $20 billion this month.
Barofsky, in a statement, said it was important that "tax dollars are not squandered by corporate executives seeking to profit illicitly from the government's unprecedented and historic bailout of the financial industry."
In October, Cuomo demanded information on bonus payouts from the nine original lenders awarded TARP funds, including Bank of America, Merrill, Bank of New York Mellon Corp, Citigroup Inc, Goldman Sachs Group Inc, JPMorgan Chase & Co, Morgan Stanley, State Street Corp and Wells Fargo & Co.
Bank of America shares rose 49 cents, or 8.2 percent, to $6.49 in afternoon trading on the New York Stock Exchange. Their 52-week high is $45.08, set last Feb 1.
(Additional reporting by Jonathan Spicer; Editing by Phil Berlowitz and Lisa Von Ahn)