Why do the Articles about John Thain Change?

Okay, I really wanted to write something insightful about John Thain’s recent dismissal. There’s lots of information swirling around since the story caught fire and, especially with John Thain’s recent memo, I think there’s an underlying story emerging. However, the story keeps changing… Not just as new facts are revealed, but the actual article keeps changing! Let’s look at the timeline.

January 22nd — The narrative turns to John Thain’s excesses and the Ken Lewis flies to New York and dismisses Mr. Thain around 11:30AM.

Later Janaury 22nd — The blogosphere catches fire with the story. Mr. Blodget writes about it here (this link is extremely important later, we’ll come back to it). Deal Journal also dedicates a lot of ink to the events (the last link is great reading, btw). Felix also writes up his thoughts.

January 23rd — The Wall St. Journal sprays their pages with several articles about the situation. Deal Journal provides a nice roundup (note this link too).

January 26th (today) — There is more reporting about BofA’s role in the P.R. nightmare that is Merrill’s early bonus payments.

January 26th (today)– I try to go back and write about the entire incident. Wanting to ensure I catch the emotion and facts as they evolved, I try to go back to the original WSJ article.

The last step is the problem. The article from the 22nd, with all it’s anonymous sourcing and inflammatory language, is totally gone. In it’s place there’s an article dated the 26th, with some of the same information, but a totally different structure. Now, let’s examine the excerpt I was able to find, from Clusterstock (first important link):

Bank of America had lost confidence in Mr. Thain, this person said, after Mr. Lewis learned of mounting fourth-quarter losses at Merrill from the transition team handling the Bank of America-Merrill merger rather than from Mr. Thain himself. And when Mr. Lewis asked Mr. Thain what happened, the Bank of America CEO did not get a “good explanation for what was happening and why,” this person said.

The Bank of America CEO also concluded Mr. Thain has exercised “poor judgment” on a number of fronts. He left for a vacation in Vail, Colo., after the losses came to light, bonus payments at Merrill were accelerated so they could be collected before the end of the year and Mr. Thain had planned to fly this week to Davos, Switzerland, even though Bank of America had signaled that such a trip was not a good idea, this person said.

(Emphasis mine.)

This section appears nowhere in the new article from the WSJ. The entire article has been rewritten. Specifically, the charge about the bonuses being accelerated, emphasized above, is totally gone.

Now, I encourage you to see for yourself. Please don’t take my word for it.. Instead, go click on the links from the 22nd and 23rd, and follow the links to WSJ articles about John Thain being dismissed and see where the link takes you. I’ll even reproduce those here, in context. However, don’t feel shy about verifying!

Well, yes, of course he did.  And it’s apparently a common affliction at Bank of America (BAC). WSJ: Bank of America had lost confidence in Mr. Thain, this person said, after … (from Clusterstock)

Bank of America and Merrill Lynch arranged the deal in less than 48 hours, and the hasty work shows. Thain’s departure Thursday is the clincher… (from Deal Journal)

It was always a bit weird that John Thain was going to stay on at Bank of America, but as it turned out, he lasted less than a month before getting fired this morning by the equally-beleaguered Ken Lewis. (from Felix)

Amazing. Maybe someone has the original article so I can write about what’s been going on and in the public sphere of debate, instead of having to rely on revisionist history.

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3 Comments on “Why do the Articles about John Thain Change?”

  1. Helpful Says:

    Less than four months after being hailed as a hero for averting the potential collapse of Merrill Lynch & Co., John Thain was pushed out of Bank of America Corp. (BAC) by his new boss, who was angered by Thain’s handling of stunning losses at Merrill.

    Bank of America Chairman and Chief Executive Kenneth Lewis, whose grip on the top job at the third-largest U.S. bank by stock-market value has been questioned as a result of Merrill’s woes, dismissed Thain on Thursday morning in a meeting that lasted less than 15 minutes, people familiar with the matter said.

    After flying to New York for the meeting in Thain’s office at Merrill’s former headquarters, Lewis asked Thain to resign. Merrill’s former chairman and CEO agreed; it was clear he had no choice.

    “Ken would not have left that meeting without a resignation,” said one person familiar with Lewis’s thinking.

    Thain had lost Lewis’s confidence, said a person familiar with the situation, following a series of events in early December. It started when Lewis learned of mounting fourth-quarter losses at Merrill from a transition team handling the merger, rather than from Thain himself.

    When Lewis asked Thain what happened, the Bank of America CEO didn’t get a “good explanation for what was happening and why,” this person said. Not only did Thain not appear concerned about the losses, but he “didn’t really have a good grasp of what was going on,” this person added.

    The Bank of America CEO also came to the conclusion that Thain had exercised “poor judgment” on a number of fronts. He lost key people in the days after the merger closed Jan. 1, including Merrill President Gregory Fleming and wealth-management chief Robert McCann. A number of senior bankers, including Andrea Orcel and Fares Noujam, are also considering leaving.

    Thain also left for a vacation in Vail, Colo., after the losses came to light, accelerated bonus payments at Merrill so they could be collected before the end of the year and scheduled a trip this week to attend the World Economic Forum in Davos, Switzerland, even though Bank of America had signaled that such a trip wasn’t a good idea, this person said. Bank of America chief risk officer Amy Woods Brinkley usually makes that trip but the company decided not to send her this year.

    Vitriol between the Bank of America and Merrill camps also stemmed from the fact that Merrill had paid out bonuses much earlier than expected. A person familiar with Merrill’s bonus scheme said executives typically are told what their bonus will be by the second week of January and the payments are made in the second half of the month. Some people inside Bank of America believe Merrill accelerated the payouts to avoid having them cut amid a much-leaner plan at Bank of America.

    Some Merrill board members have complained Thain didn’t fully inform them that mounting losses at the bank threatened to derail the deal last month, until the federal government agreed to step in with $20 billion in additional capital and a sharing of losses on $118 billion in assets.

    At the center of the upheaval is the unexpected $15.31 billion fourth-quarter loss at Merrill. The loss was a surprise for a number of reasons, including the fact that Wall Street had believed Merrill’s biggest problem was losses tied to debt pools underpinned by subprime securities. But in a securities filing this week, Merrill detailed a much wider array of losses, including a commercial-property write-down totaling $1.13 billion, a leveraged loan write-down of $1.9 billion and losses tied to credit bets totaling $3.2 billion.

    The recent missteps are simply the latest in a string of decisions Thain has made since his arrival at Merrill that have proven costly to the 53-year-old executive. He was heralded as the dream candidate when he became chief executive and chairman of Merrill when he landed there in late 2007.

    The Merrill Thain inherited was weighed down by billions of dollars in soured mortgages and he was untainted by the growing crisis that had already cost some CEOs their jobs, including his predecessor, Stanley O’Neal.

    Thain was dubbed Mr. Fix It. The level-headed Massachusetts Institute of Technology engineering graduate had a Harvard MBA and had served as president of Goldman Sachs.

    Within weeks of his arrival, he raised billions of dollars to cover Merrill’s escalating losses. But like many other Wall Street chiefs, Thain underestimated the magnitude of the storm to come.

    “This problem is not a zero, but it is for the most part behind us,” Thain said in an interview with The Wall Street Journal in mid-January 2008.

    In one of his first missteps as CEO, Thain, pressed for capital and optimistic the market would soon turn, cut deals with some early investors in Merrill that would prove costly to Merrill shareholders. Thain promised a number of shareholders who invested in Merrill in December 2007 and January 2008 that if the bank issued additional common stock at a lower price within a year, the firm would compensate them. Within months, the firm had to raise more cash at $25 a share. Merrill issued additional shares to pay off its earlier investors, diluting its common shares by 39%. The dilution essentially cost shareholders about $5 billion.

    At the same time, Thain made some key hiring decisions that proved divisive. Thain took over from Stanley O’Neal and inherited O’Neal’s executive team. A number of executives left, but a handful, notably Fleming and McCann, stayed. Fleming, an investment banker, was named president and McCann continued to oversee the firm’s powerful retail brokerage network.

    Thain also offered Goldman colleagues Peter Kraus and Montag multimillion-dollar packages to join the financially strapped Merrill, offending many people at the firm, including others on the executive committee. McCann and Fleming, for instance, went without bonuses in 2007 and 2008.

    Montag, who started in August as Merrill’s global head of sales and trading, was given a guaranteed payout of $39.4 million for 2008. Kraus, who joined Merrill in September and left in late December, received an exit payment triggered by Bank of America’s acquisition of Merrill of $25 million, according to people familiar with the matter.

    Fleming’s departure created unrest in the firm’s investment banking department and a number of senior banker, including Andrea Orcel, the head of Merrill Lynch International, are considering leaving.

    Tensions rose in December when Thain’s behind-scenes-lobbying for a bonus spilled out in public. Most Wall Street CEOs, under fire for mounting mortgage losses, went without bonuses in 2008. But Thain, arguing he helped repair Merrill and engineered the sale of the firm to Bank of America, for months lobbied his board’s compensation committee for a multimillion-dollar payment. Once his efforts became public, he came under fire. In the end he asked for no bonus and was awarded nothing.

    Before arriving at Merrill, Thain merged the centuries-old private New York Stock Exchange with a publicly traded company that specialized in computerized trading. He also merged the Big Board with one of Europe’s largest exchange operators to give the company exposure to faster-growing derivatives products and international markets.

    But Thain left before the new company, NYSE Euronext, could gather momentum. Amid a toughening market and the challenges with integrating the two companies, NYSE Euronext stock has fallen more than 75% since the beginning of 2007, compared with a 65% fall at rival exchange operator CME Group and a 32% decline in shares of Nasdaq OMX Group Inc.

    “There are some who think he left his successor holding the bag,” at NYSE Euronext, says Richard Repetto, an analyst with Sandler O’Neill. “But he did turn the ship and orchestrate some dramatic changes.”

    In Davos, Thain was slated to speak Jan. 30 on a high-powered panel titled, “Scenarios for the Future of the Global Financial System.” Among the panel’s topics: “The demise of independent investment banks,” according to the World Economic Forum, which organizes the annual event.

    Lewis is also under fire for his handling of the Merrill situation.

    Shareholders are asking why Lewis didn’t discover some of the troubles at Merrill prior to the Sept. 15 deal announcement, and why he didn’t disclose the problems to shareholders before the merger closed Jan. 1.

    “He and the board acted imprudently,” said Richard Finger, a partner in Houston-based Finger Interests Number One Ltd., which owns more than 1 million shares.

    Finger Interests filed a suit Thursday in federal court, arguing the bank and its directors failed to disclose “material” information to shareholders. Mr. Finger added Lewis should give up his title as chairman so the board can become more “independent.”

    Bank of America’s board is scheduled to meet next week in Charlotte, but a person familiar with the board’s deliberations said Lewis’s job isn’t in danger, nor is his title as chairman. Bank of America’s board, this person said, was informed about Merrill’s larger-than-expected losses shortly after Lewis knew about them.

  2. John Reed Says:

    Why does the whole world worship at the temple of John Thain?

    Since when does a clueless greedy knob like JT rate anything but a night shift at Burger King? THis is ridiculous, and speaks to the very sad state of a world where corporate CEOs are not visionary leaders, but ignorant smirking fratboys. Really. Such a sorry, sad, appalling disgrace.


  3. [...] Dear John Thain Once upon a time I wrote John Thain a letter. I never heard back. Maybe my thoughts need a broader audience. « Why do the Articles about John Thain Change? [...]


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