Thain, BofA exec called to testify on bonus payments

New York's attorney general Andrew Cuomo on Tuesday issued a subpoena to former Merrill Lynch Chief Executive John Thain to testify on the payment of bonuses to executives worth $4 billion.

Cuomo also issued a subpoena to Bank of America's chief administrative officer J. Steele Alphin, who reportedly discussed with Thain about the bonus payments in late November and early December. The bonuses were paid just three days before Merrill Lynch and BofA's merger was completed.

The subpoenas issued today take the dispute between Thain and Bank of America to a new level of legal exposure on both sides. Also Bank of America shareholders are suing the bank for failing to communicate about the true state of Merrill's financial condition before and after the vote in December 5 approved the deal.

Merrill usually paid these bonuses in late January or February. The timing created controversy given the fact that Merrill Lynch reported an unexpected loss on the fourth quarter of $15.31 billion. Bank of America was pressured to ask for an additional $20 billion in bailout funds from the U.S. government to absorb the debt.

The subpoenas are part of an ongoing probe into the bonuses paid by Merrill Lynch last year.

The fact that Merrill Lynch appears to have moved up the timetable to pay bonuses before its merger with Bank of America is troubling to say the least and warrants further investigation, said Cuomo in a statement.