February 25, 2009— -- John Thain, former CEO of Merrill Lynch , finally revealed the names of the executives who received multi-million dollar bonuses on the eve of his failing firm's merger with Bank of America, ABC News has learned. Thain was ordered to reappear before New Attorney General Andrew Cuomo Tuesday after initially refusing to divulge the details of the firm's controversial 11th hour bonuses from a $3.6 billion pool.
Thain, in his first deposition on February 19th, had initially refused to answer questions regarding the bonuses, according to a partial transcript of that session. On Monday, he was ordered to reappear after the Attorney General's office sought and received a court order compelling him to answer the questions.
The bonuses became a subject of the investigation into Merrill's merger with Bank of America by Cuomo's office after the Attorney General raised whether the two banks -- which together received about $45 billion in taxpayer dollars -- worked together to arrange the early bonus plan just weeks before the merger was completed.
The bonuses were awarded despite the fact that Merrill lost $25 billion in 2008 and posted greater than anticipated fourth quarter after-tax losses of $5 billion dollars.
According to the terms of Thain's court-ordered deposition by Acting State Supreme Court Judge Bernard Fried, the names and bonus amounts will remain confidential at least until his review. The reason cited was to protect Bank of America's competitive status against other banks which have not had to disclose how they award performance and retention packages to key employees.
Sources tell ABC News that a non-public agreement between Merrill and Bank of America was signed September 15th, 2008. The two companies initially agreed that Merrill Lynch could award up to $5.8 billion in performance bonuses, an amount that was later reduced to "under $4 billion" following a conversation between Thain and Bank of America's Steele Alphin, the top aide and close confidant of the bank's CEO, Ken Lewis, the sources said.
According to two sources who have seen the document, which has never been quoted publicly, the agreement states the form of the bonuses "shall be determined by the company (Merrill) in consultation with the parent (Bank of America)."
It is the first disclosure of an official record of the involvement of Bank of America in the orchestration of the bonus packages. Bank of America spokesperson Scott Silvestri simply e-mailed "No comment" in reply to a specific request to address the substance and language of the agreement and subsequent conversations altering the bonus portion of the disclosure schedule.
Those bonuses were awarded on an accelerated schedule, Cuomo has said, in order to occur before the merger of the two firms.
The document, sources say, is titled: "DISCLOSURE SCHEDULES to AGREEMENT AND PLAN OF MERGER By and between MERRILL LYNCH & CO., INC. And BANK OF AMERICA CORPORATION" and states on page 14 that the "Variable Incentive Compensation Program ("VICP")" "in respect of 2008 . . . . . may be awarded at levels that do not exceed $5.8 billion in aggregate value (inclusive of cash bonus and the grant date value of long-term incentive awards)."
According to Thain's spokesperson, Jesse Derris of Sunshine Sachs Associates, the reason his client required the court to specifically order him to reveal which bonuses were paid to the top earners at Merrill was to avoid legal jeopardy. Thain and his lawyer had said that Bank of America had directed him not to disclose the information.
"He was always willing to answer the questions. He just didn't want to get into legal jeopardy." Derris said. Both Derris and Thain's lawyer, Andy Levander, told ABC News that Thain "had no horse in this race" and the disagreement was always between the Attorney General and Bank of America.
The New York Attorney General's office declined to publicly comment on the matter.
Thain had initially responded to a subpoena by Attorney General Andrew Cuomo on Thursday. However, during that all day session, he and his lawyer repeatedly declined to answer the questions Cuomo's top lawyer Benjamin Lawsky asked about the specific bonuses awarded to each of the top executives.
According to sources involved in the probe, Cuomo's office is seeking information about the individual awards of about 200 top employees. The top 14 got $250 million and the top 159 received over $858 million in bonuses. Overall, sources said, 694 employees at Merrill received bonuses in excess of $1 million. The bank's four top executives received $121 million.
The schedule agreed to by Merrill and Bank of America initially called for the bonuses to be awarded 60 percent "as a current cash bonus" and 40 percent as "a long-term incentive award in the form of equity or long term cash awards. According to sources familiar with the conversation, Alphin asked Thain to alter those terms to 70 percent cash and 30 percent equity or long term cash.