Bank of America Corp.'s chief executive agreed to cut his salary in response to criticism by the government's pay czar, while new information emerged about the company's controversial purchase of Merrill Lynch.
Kenneth D. Lewis, who announced his retirement earlier this month, agreed to return this year's salary to the bank. He still will be able to collect a $53.2 million pension, the New York Times reported. His decision come shortly before Kenneth R. Feinberg, the Treasury official overseeing compensation issues, is due to pass judgment on pay at the largest of the bailed-out banks.
Lewis has been the subject of heavy criticism for his leadership of the bank as it has struggled to extricate itself from last year's economic crisis. Bank of America announced today that it had posted a net loss of $2.2 billion for the third quarter, exceeding analysts' expectations.
Bank of America's purchase of Merrill Lynch is seen by many as Mr. Lewis's biggest mistake. Not only did the bank misread the extent of Merrill's losses, but it now is in hot water with federal regulators and state authorities over the proxy materials offered in advance of a shareholder vote to approve the purchase.
This week, the bank handed over to a congressional committee email records relating the merger. Investigators want to know what bank executives believed about Merrill's financial condition, as well as the legal authority they relied upon in not telling shareholders that they had promised to pay Merrill executives billions of dollars on bonuses once the deal was completed.
Newly released details about the counsel provided by white-shoe law firm Wachtell, Lipton, Rosen & Katz show that the bank was advised not to share information about Merrill's books with shareholders, so long as the firm's losses were comparable to those being suffered by other major investment houses.
Legal experts told the Times that they were shocked by this advice.
"When shareholders are asked to vote, they deserve a fine-tuned picture and are not to be expected to piece together pieces of public knowledge, public awareness and economic awareness to make the right decision," Donald C. Langevort, a professor at Georgetown Law, told the paper.
Wachtell lawyers were also responsible for failing to include information about the Merrill bonuses in the proxy material, the newly released documents show. According to the Times, the firm decided to hide the information from investors "without consulting the bank's management."
The Times reported that Andrew M. Cuomo, the attorney general of New York, has issued subpoenas to two Wachtell lawyers over the matter.
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