Q4 Losses and the $4 Billion Question: Thain and Lewis on the Hot Seat

[WSJ Law Blog]

December was a poor month for former Merrill CEO John Thain. January has been far worse. Last week, he resigned. On Tuesday, New York AG Andrew Cuomo said he was seeking testimony from Thain and BofA?s chief administrative officer on its decision to accelerate bonus payments to Merrill employees.



Merrill Lynch Chairman and CEO John Thain, left, and Bank of America Chairman and CEO Ken Lewis, Sept. 15, 2008. (AP)

The latest: Cuomo is expanding the scope of his investigation into bonuses, with the inquiry now likely to include whether directors and shareholders were misled about Merrill’s giant fourth-quarter losses. Here’s the WSJ report.

In addition, Cuomo wants to know why BofA didn’t disclose that Merrill’s condition was deteriorating. BofA’s CEO, Ken Lewis, is also likely to face questions from Cuomo about bonus payouts by Merrill, including what he told directors about them.

Thain and BofA declined to comment.

On the bonus issue, Cuomo’s office is reportedly looking at possible remedies such as trying to recover bonuses already paid, fines or alleging securities-law violations. In a statement, Cuomo said Bank of America faces a “$4 billion question” about “why it failed to stop Merrill Lynch from issuing year-end bonuses as it was taking over the company.”