Merrill consulted Bank of America over controversial $4bn bonuses
BANK OF America (BofA) had significant input into Merrill Lynch’s controversial decision to pay $4 billion (€3.08 billion) in bonuses in December just as mounting losses were threatening to derail BofA’s takeover of the Wall Street firm, according to people close to the situation.
BofA has said that the payment of $4 billion in compensation in a fourth quarter in which Merrill racked up $15 billion in losses was sanctioned by John Thain, Merrill’s chief executive. Ken Lewis, BofA’s embattled chief executive, ousted Mr Thain on Thursday.
BofA said last week that Mr Thain had made the decision to pay bonuses in December instead of January and that it had been “informed”.
A person familiar with Mr Thain’s actions said the ousted chief had at least two conversations with BofA’s chief administrative officer J Steele Alphin prior to a December 8th board meeting at which Merrill’s bonus payments were approved.
The source said that Mr Alphin recommended, and Mr Thain accepted, a proposal to change Merrill’s incentive compensation mix (60 per cent cash and 40 per cent stock) to conform with BofA’s system (70-30).
BofA yesterday confirmed there were conversations about the payments. “We never said we didn’t talk with them about it,” said a spokesman. “But . . . it was their decision and they informed us of it.”
BofA has said it learned of Merrill’s mounting losses in the second week of December. Merrill insiders said that the investment bank supplied BofA with daily profit and loss statements starting in November.
It is unclear whether those statements detailed Merrill’s trading positions and its daily losses. – ( Financial Timesservice)