Ousted Thain to pay for $1.2m office refit

Stephen Foleyin New York
Tuesday 27 January 2009 01:00

John Thain, ousted boss of Merrill Lynch, has begun an attempt to repair his tattered reputation, saying he will reimburse the $1.2m that the company spent to redecorate his office last year.

The former chief executive, who quit last week after a showdown with Ken Lewis, head of Merrill's new owner, Bank of America, said that expenses including $85,000 on a Persian rug and $1,400 on a wastepaper basket were "a mistake in light of the world we live in today".

The redecoration, masterminded by the celebrity designer Michael Smith for a fee of $800,000, was one of Mr Thain's first acts on joining Merrill Lynch at the end of 2007 to lead the repair of its balance sheet, battered by multibillion-dollar losses on mortgage derivatives under his predecessor, Stan O'Neal.

Pleading mitigation in a parting memo to Merrill staff, Mr Thain said that "the expenses were incurred over a year ago in a very different environment".

Mr Lewis and Mr Thain sealed the takeover of Merrill for $50bn in stock over the chaotic and terrifying weekend that Lehman Brothers slipped into bankruptcy. At the time, Mr Thain was hailed as a hero for saving something for his shareholders, but Mr Lewis became disillusioned and distrustful as Merrill's losses mounted in the weeks before the deal was finally completed on 1 January. In the final quarter, Merrill reported a record $15.3bn loss.

Mr Thain said it was positions taken under Mr O'Neal that continued to sour. "The losses 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."

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