John Thain is fighting back.
The former Merrill Lynch CEO was ousted last week as a Bank of America exec after Merrill posted massive losses in the last quarter before its takeover by B of A. In December, Thain had approved billions of dollars in bonuses before the takeover went into effect. He also spent $1.2 million redecorating his office suite last year. (We catalogued our Top Ten Thain Moments here.)
Thain says that Merrill’s 2008 bonuses totaled only 41 percent of 2007’s, and that Bank of America was involved in the decision.
As for the fourth quarter losses, Thain calls them “very large and unfortunate” but adds that they “were incurred almost entirely on legacy positions and were due to market movements.” In other words, not his fault.
That appears to run counter to the New York Times report that a substantial part of those losses came from Merrill’s disastrous decision to continue buying mortgage assets into the fall, in the belief that the market had bottomed out.
Thain also says B of A knew about the losses as soon as Merrill did:
We were completely transparent with Bank of America. They learned about these losses when we did. The acting CFO of my businesses was Bank of America’s former Chief Accounting Officer. They had daily access to our p&l, our positions and our marks. Our year end balance sheet target (which we more than met) was given to us by Bank of America’s CFO.
Thain refers to “several topics that have been inaccurately reported in the press” but doesn’t specify what the inaccuracies were.
CNBC is also reporting that in an exclusive interview, set to air at 4:15 today, Thain argued that the bonuses were necessary to retain top staffers.
The full memo follows after the jump…
To my Merrill Lynch colleagues:
It has been an honor to lead this company over the last very difficult year. The decisions that I made were always with the best interests of our shareholders and employees above all. I believe that the decision to sell to Bank of America was the right one for our company and our clients. While the execution has been difficult, I still believe in the strategic rationale of the transaction and I wish you all the best for the future of the combined companies.
I want to address several topics that have been inaccurately reported in the press. The first issue is our year end bonus payments. Our 2008 discretionary bonus pool was 41% lower than 2007. The size of the pool, its composition (cash and stock mix), and the timing of the payments for both the cash and stock were all determined together with Bank of America and approved by our Management Development and Compensation Committee and our Board. The total bonus pool was also substantially less than the amount allowed under our merger agreement.
The second topic is the losses in the fourth quarter, which were very large and unfortunate. However, they were incurred almost entirely on legacy positions and were due to market movements. We were completely transparent with Bank of America. They learned about these losses when we did. The acting CFO of my businesses was Bank of America’s former Chief Accounting Officer. They had daily access to our p&l, our positions and our marks. Our year end balance sheet target (which we more than met) was given to us by Bank of America’s CFO.
The final topic is the expenses related to my office. The $1.2 million reported in the press was for the renovation of my office, two conference rooms and a reception area. The expenses were incurred over a year ago in a very different environment. Nonetheless, they were a mistake in the light of the world we live in today. I will therefore reimburse the company for all of the costs incurred.
I thank all of you for your hard work and your support over the past year. I wish you all success in the future.