Wednesday, November 25, 2009

BofA clean-up: Mayopoulos didn't do any deeds as regards Merrill bonuses

This is so last week, but my ocd regarding the BofA matter compels me to keep the subject up-to-date here.

Last week various BofA officals testified before the House Committee on Oversight and Government Reform. While there was discussion of Mayopoulos’ dismissal, the most interesting testimony came from Mayopoulos himself regarding whether Merrill losses triggered a material adverse change (“MAC”). Recall, a MAC would have allowed BofA to avoid the Merrill acquisition.

November 20th: Mayopoulos and outside counsel at Wachtell agreed that a disclosure on the Merrill losses was not necessary. The losses at that time were projected to be $5 billion, which were similar to previous Merrill losses and had in fact already been disclosed as expected.

December 1st: Mayopoulos was asked by BofA CFO Joe Price to examine the MAC clause of the merger agreement. Although Mayopoulos did not recall any assertion by Price that a MAC had occurred, Mayopoulos testified he advised that the Merrill losses did not constitute a MAC.

December 9th: Four days after BofA shareholders voted to approve the merger, Mayopoulos learned the Merrill losses were greater than expected ($9 billion), and he asked to speak with CFO Price asap. While he continued to think disclosure of the Merrill losses weren’t necessary, it was because he thought the estimates were guesses. He was told to wait until the next day. By noon the next day Mayopoulos was pulled from a meeting and fired immediately – no notice or reason was given.

Speculation last week suggested Mayopoulos’ firing was done so as to avoid any resistance he may have posed when BofA approached federal actors regarding a possible MAC and withdrawal from the Merrill acquisition.

Regrettably, we don’t really have any more information regarding the bonus situation. Mayopoulos testified that he neither negotiated the Merrill bonuses or participated in drafting the merger agreement or proxy materials that preceded the acquisition.

Hat-tip: Corporate Counsel.

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