Merrill Ex-CEO Thain Agrees to Leave Bank of America (Update4)
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By Josh Fineman and David Mildenberg
Jan. 22 (Bloomberg) -- John Thain, who engineered the sale of 95-year-old Merrill Lynch & Co. to Bank of America Corp. in September, was ousted after Merrill’s $15.4 billion loss forced the lender to seek more money from the U.S. government.
Thain, 53, “agreed his situation was not working out and that he should resign,” Bank of America spokesman Robert Stickler said in an e-mail today. His exit ends Thain’s tenure with the Charlotte, North Carolina-based bank less than a month after Merrill’s takeover was completed.
Thain negotiated the sale with Bank of America Chief Executive Officer Kenneth Lewis, 61, whose credibility was undercut when the brokerage reported a record fourth-quarter deficit. Lewis, who considered backing out of the deal when he learned of the extent of Merrill’s losses last month, went ahead at the insistence of U.S. regulators who provided a new $138 billion aid package.
“There was a certain surprise that the Merrill losses were as steep as they were,” said James Post, a professor of corporate governance and business ethics at Boston University School of Management. “On top of that, I think Lewis didn’t think Thain was doing as much as he could to control the expenses and minimize the losses.”
Thain’s Purchase
Shares of Bank of America, down 53 percent this year through yesterday, slid 8 percent to $6.16 as of 2:09 p.m. in New York Stock Exchange composite trading. Thain bought 84,600 shares of Bank of America at $5.71 each the day before his ouster, according to The Washington Service.
In a related development, New York Attorney General Andrew Cuomo is investigating bonuses that Merrill paid to its executives just before its sale to Bank of America, a person familiar with the matter said. Bank of America’s purchase of Merrill closed at the end of 2008. Merrill normally paid bonuses in January or February.
Thain, who had headed Bank of America’s wealth management and corporate and investment banking divisions, will be succeeded by General Counsel Brian Moynihan, the bank said in a statement. Moynihan, 49, ran global corporate and investment banking at Bank of America prior to the Merrill takeover, and had also served as president of global wealth and investment management.
Senior Merrill executives Robert McCann and Greg Fleming resigned less than a week after the transaction was completed on Jan. 1.
Weekend of Lehman
Trading chief Tom Montag, 52, who was hired by Thain from Goldman Sachs Group Inc., will stay with the company, according to Stickler, the Bank of America spokesman. Montag will continue to run global markets, and will now report to Lewis and be a member of the team that sets company strategy.
Thain agreed to sell Merrill after less than a year as CEO, on the same weekend that Lehman Brothers Holdings Inc. filed for a record-breaking bankruptcy.
Merrill had hired Thain, a longtime Goldman Sachs Group Inc. banker, from the New York Stock Exchange in late 2007 with a $15 million signing bonus. Replacing E. Stanley O’Neal as Merrill’s CEO, Thain pledged to live up to his reputation as “Mr. Fixit,” the sobriquet he earned while rescuing the NYSE.
Instead, he held onto more than $40 billion of subprime- tainted bonds as the market cratered. He agreed to terms with investors such as Singapore sovereign wealth fund Temasek Holdings Pte. that later cost the firm $4.9 billion.
40 Departures
Thain also recruited a chief financial officer with no experience at a securities firm, while more than 40 senior executives, bankers and traders departed. In the end, he merged Merrill into a large bank -- a step O’Neal concluded was needed in mid-2007, when the stock was trading at more than six times higher.
The former Merrill CEO received a salary of $750,000 last year and didn’t get a bonus. Cuomo said in December that a performance bonus for Merrill’s CEO and other top executives would be an “oxymoron” during such an “abysmal year.”
Thain spent $1.2 million to redecorate his office at New York-based Merrill, CNBC reported today. CNBC earlier today reported Thain’s departure.
To contact the reporters on this story: Josh Fineman in New York at [email protected].
Last Updated: January 22, 2009 16:53 EST
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Email | Print | A A A
By Josh Fineman and David Mildenberg
Jan. 22 (Bloomberg) -- John Thain, who engineered the sale of 95-year-old Merrill Lynch & Co. to Bank of America Corp. in September, was ousted after Merrill’s $15.4 billion loss forced the lender to seek more money from the U.S. government.
Thain, 53, “agreed his situation was not working out and that he should resign,” Bank of America spokesman Robert Stickler said in an e-mail today. His exit ends Thain’s tenure with the Charlotte, North Carolina-based bank less than a month after Merrill’s takeover was completed.
Thain negotiated the sale with Bank of America Chief Executive Officer Kenneth Lewis, 61, whose credibility was undercut when the brokerage reported a record fourth-quarter deficit. Lewis, who considered backing out of the deal when he learned of the extent of Merrill’s losses last month, went ahead at the insistence of U.S. regulators who provided a new $138 billion aid package.
“There was a certain surprise that the Merrill losses were as steep as they were,” said James Post, a professor of corporate governance and business ethics at Boston University School of Management. “On top of that, I think Lewis didn’t think Thain was doing as much as he could to control the expenses and minimize the losses.”
Thain’s Purchase
Shares of Bank of America, down 53 percent this year through yesterday, slid 8 percent to $6.16 as of 2:09 p.m. in New York Stock Exchange composite trading. Thain bought 84,600 shares of Bank of America at $5.71 each the day before his ouster, according to The Washington Service.
In a related development, New York Attorney General Andrew Cuomo is investigating bonuses that Merrill paid to its executives just before its sale to Bank of America, a person familiar with the matter said. Bank of America’s purchase of Merrill closed at the end of 2008. Merrill normally paid bonuses in January or February.
Thain, who had headed Bank of America’s wealth management and corporate and investment banking divisions, will be succeeded by General Counsel Brian Moynihan, the bank said in a statement. Moynihan, 49, ran global corporate and investment banking at Bank of America prior to the Merrill takeover, and had also served as president of global wealth and investment management.
Senior Merrill executives Robert McCann and Greg Fleming resigned less than a week after the transaction was completed on Jan. 1.
Weekend of Lehman
Trading chief Tom Montag, 52, who was hired by Thain from Goldman Sachs Group Inc., will stay with the company, according to Stickler, the Bank of America spokesman. Montag will continue to run global markets, and will now report to Lewis and be a member of the team that sets company strategy.
Thain agreed to sell Merrill after less than a year as CEO, on the same weekend that Lehman Brothers Holdings Inc. filed for a record-breaking bankruptcy.
Merrill had hired Thain, a longtime Goldman Sachs Group Inc. banker, from the New York Stock Exchange in late 2007 with a $15 million signing bonus. Replacing E. Stanley O’Neal as Merrill’s CEO, Thain pledged to live up to his reputation as “Mr. Fixit,” the sobriquet he earned while rescuing the NYSE.
Instead, he held onto more than $40 billion of subprime- tainted bonds as the market cratered. He agreed to terms with investors such as Singapore sovereign wealth fund Temasek Holdings Pte. that later cost the firm $4.9 billion.
40 Departures
Thain also recruited a chief financial officer with no experience at a securities firm, while more than 40 senior executives, bankers and traders departed. In the end, he merged Merrill into a large bank -- a step O’Neal concluded was needed in mid-2007, when the stock was trading at more than six times higher.
The former Merrill CEO received a salary of $750,000 last year and didn’t get a bonus. Cuomo said in December that a performance bonus for Merrill’s CEO and other top executives would be an “oxymoron” during such an “abysmal year.”
Thain spent $1.2 million to redecorate his office at New York-based Merrill, CNBC reported today. CNBC earlier today reported Thain’s departure.
To contact the reporters on this story: Josh Fineman in New York at [email protected].
Last Updated: January 22, 2009 16:53 EST
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