Merrill and BofA Deposition Excerpts

Exhibit C
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IN RE: EXECUTIVE COMPENSATION INVESTIGATION
BANK OF AMERICA - MERRILL LYNCH
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EXAMINATION of JOHN ALEXANDER THAIN,
taken at the Office of the New York State Attorney
General, 120 Broadway, New York, New York, on
February 19, 2009 at 10:10 a.m., pursuant to a
Subpoena, before SARA FREUND, a Shorthand Reporter
and a Notary Public of the State of New York.

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2 billion and $25 billion. The structures that we're
3 being talked about in terms of the potential rescue
4 of Lehman posed significant difficulties, and we
5 were aware that Lehman was talking to at least two
6 potential acquirers, Bank of America and Barclays.
7 Mid-morning on Saturday, I became very
8 concerned that the combination of the potential
9 loss in the commercial mortgage portfolio, and the
10 complications of putting any type of rescue
11 together without any form of government assistance
12 made it likely that Lehman would not, in fact, be
13 rescued; that it would fail. And I was very
14 concerned about the impact a Lehman failure would
15 have on the market generally upon all the financial
16 institutions, but, in particular, on Merrill Lynch.
17 Q. That would be a good place just to ask
18 you to focus a little more on what occurred on
19 Saturday morning that heightened your concern then
20 that led you to think that Lehman might fail.
21 A. It was a combination of the fact that
22 the size of the loss was of a magnitude that it was
23 going to be difficult to put together a rescue
24 package, and the structures that could possibly do
25 that were very difficult to put together with that
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1 J. A. Thain
2 group. If you go back to long-term capital -- and
3 I was part of the group that put that rescue
4 package together -- that was $4 billion, and that
5 was difficult enough. The idea of putting
6 together, whether it's $15 billion or $25 billion,
7 and making that actually happen in a relatively
8 short period of time, it was my personal assessment
9 that that was very unlikely. And the combination
10 of Tim Geithner, Hank Paulson and Chris Cox,
11 continued to maintain that the government was not
12 going to provide any form of assistance, so I felt
13 that I needed to give Merrill Lynch alternatives in
14 the event of a Lehman bankruptcy. So mid-morning I
15 placed a phone call to Ken Lewis saying that we
16 would like to engage in a conversation about a
17 strategic transaction, and he said "Fine" -- he
18 was, I believe, at his home in Charlotte -- and he
19 said, "I can be there mid-afternoon," and we agreed
20 to meet at 2:30 on Saturday afternoon at their
21 corporate apartment in Time Warner.
22 Q. Before we go into the conversation with
23 Mr. Lewis, could you just go through a little bit
24 on what your thinking was, at the time, about the
25 impact a Lehman failure would have on Merrill?

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1 J. A. Thain
2 A. It's always a little bit difficult to
3 remember exactly what your thinking was on a
4 particular day because many things had transpired
5 since then, and, of course, I now know what the
6 real impact was of the Lehman failure, but my best
7 recollection of Saturday was that because of the
8 problem assets on Merrill's balance sheet and
9 because of the funding requirements on Merrill's
10 balance sheet, that the likely impact of a Lehman
11 bankruptcy would focus on Merrill next as opposed
12 to Morgan Stanley or Goldman Sachs, and that we
13 would likely have very serious funding problems
14 beginning Monday morning.
15 Q. And if you could flush that out a little
16 bit. What would the funding problems be, and what
17 would they lead to?
18 A. The types of funding problems come from
19 the financing of the balance sheet, in particular,
20 the financing of less liquid assets through REPO,
21 through unsecured funding, and also the financing
22 that's provided through the prime brokerage
23 businesses. Although we were continually building
24 up our liquidity positions, the size of liquidity
25 drains that were possible, and the inability to

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2 finance positions in the REPO market, and the
3 potential withdrawal of cash out of the prime
4 broker, all of which had a significant risk of
5 causing a liquidity problem at Merrill --
6 MR. CORNGOLD: In light of what happened
7 to Lehman, why was that a premise -- that
8 is, if Lehman would come up with a structure
9 to preserve Lehman, wouldn't you have the
10 same problems on Monday morning?
11 THE WITNESS: The problems would still
12 have been there, my best guess, but to a much
13 lesser extent. So the bankruptcy at Lehman,
14 in my view, caused a complete shutdown in the
15 credit markets. And so if Lehman had been
16 rescued, yes, we would have had funding
17 issues, and, yes, we would have had continued
18 to focus a lot on our liquidity position --
19 which we have been really over the course of
20 the entire year -- but the failure of Lehman
21 really caused a complete unwillingness of
22 financial institutions to lend money to each
23 other, to provide financing for each other,
24 and, so whatever might have happened --
25 MR. CORNGOLD: And you anticipated -- I

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2 mean, you're now doing the what happened as
3 opposed to what you were anticipating -- you
4 anticipated that the failure of Lehman would
5 have caused a shutdown.
6 THE WITNESS: No. I anticipated that
7 the failure of Lehman would have caused very
8 severe problems for Merrill Lynch.
9 Q. By the way, did you have any kind of
10 task force or similar groups set up to, in fact,
11 game out the position Merrill Lynch would have been
12 in if Lehman failed?
13 A. We were constantly focused on our own
14 liquidity position and constantly focused on the
15 difficulties in the marketplace. We had not, prior
16 to that weekend, specifically gamed out what would
17 happen if Lehman would have failed.
18 MR. CORNGOLD: Did you know when you
19 called Bank of America that their transaction
20 with Lehman was dead -- or was it dead at
21 that time?
22 THE WITNESS: I did not know.
23 MR. CORNGOLD: So wasn't your call to
24 Bank of America, wouldn't that have
25 contributed to the problem that you

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2 MR. CORNGOLD: But you didn't know that
3 when you called.
4 THE WITNESS: That's true. I did not.
5 Q. Did you have an assessment of how long
6 Merrill would have if it didn't do a quick marriage
7 with someone else in the event --
8 A. In the event of a Lehman bankruptcy?
9 Well, you're asking me to predict what might have
10 happened -- which, of course, I can't necessarily
11 do -- but these type of liquidity problems become
12 critical within days. And, in fact, Lehman, as an
13 example, Lehman's liquidity problems accelerated
14 very, very quickly.
15 Q. So, at this point, finding a partner for
16 Merrill became a priority?
17 A. Correct.
18 MR. CORNGOLD: And -- I'm sorry -- that
19 was true whether Lehman was going to do a
20 transaction that preserved it or not, I take
21 it.
22 THE WITNESS: No. I don't agree with
23 that.
24 MR. CORNGOLD: It's sort of a game
25 theory thing. You make this call on Saturday

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2 last were, the chronology was that you had spoken
3 with Ken Lewis and set up a 2:30 meeting at the
4 Time Warner building.
5 A. Yes.
6 Q. Did that occur?
7 A. Yes.
8 Q. Why don't you pick up the time line
9 there?
10 A. So we got together; we talked about the
11 logic of the business fit and the strategy of the
12 businesses of Bank of America and the businesses of
13 Merrill Lynch. I said to him that I was interested
14 in selling a 9.9 percent stake and getting a large
15 credit facility. He said to me that he really
16 wasn't interested in buying a minority stake, but
17 he would be interested in buying the whole company.
18 I said to him, "Well, I didn't come here to sell
19 the company," and we jointly agreed to pursue both
20 paths, a hundred percent and 9.9 percent, and we
21 set our various teams off on a due diligence and
22 structure process.
23 Q. And what happened after the meeting?
24 A. I mobilized our team and he mobilized
25 his team, and they began a process of due diligence

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2 and structure. That continued really all through
3 Saturday afternoon, Saturday evening, Sunday.
4 Q. That sort of is a very condensed due
5 diligence cycle. Can you speak to that, how the
6 due diligence was accomplished in those two days?
7 A. I was not party to that. That was
8 conducted on our side by people who work for me,
9 and I can't say on Bank of America's side.
10 Q. On your side, who reported to you on
11 that issue?
12 A. Primarily Greg Fleming.
13 Q. Did you have discussions with Greg
14 Fleming about how the due diligence for a deal with
15 Bank of America would be accomplished in,
16 basically, a Saturday/Sunday time frame?
17 A. Greg Fleming is a very experienced
18 financial institution investment banker -- that's
19 where he came from. I don't recall a specific
20 conversation about the due diligence process, but I
21 was quite comfortable that he was capable of
22 conducting that.
23 Q. How about from the side of Bank of
24 America? Meaning, what was your understanding of
25 what Merrill did to give Bank of America

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2 attention to is page 293 of the document, which is
3 towards the back. There is a bullet point called
4 "Section 5.2B."
5 A. Is this part of the schedule?
6 Q. Yes.
7 So you now have page 293 in front of
8 you?
9 A. I do.
10 Q. Did you participate in the negotiation
11 of this provision?
12 A. I did not.
13 Q. Were you aware of this provision? When
14 I'm saying "this provision" I'm talking about
15 Section 5.2B on page 293 regarding the "Variable
16 Incentive Compensation Program."
17 A. I was aware that it was being
18 negotiated.
19 Q. If you could tell me what your
20 understanding was of what was being negotiated
21 here.
22 A. My understanding of what was being
23 negotiated, was to provide for us, Merrill Lynch,
24 to be able to pay bonuses to our employees prior to
25 the deal closing, and that this provision set a cap

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2 on the amount that we could pay out in those
3 bonuses. The main operative cap is the expense
4 number, the $4.5 billion number, and it also
5 specified the mix of cash and stock that we would
6 use. And the expectation was that these bonuses
7 would be paid out prior to the deal closing, and
8 that deal closing was expected to be on or around
9 December 31.
10 MR. LAWSKY: You said you were aware
11 that this was being negotiated. How did you
12 know?
13 THE WITNESS: Through discussions with,
14 primarily, Greg Fleming.
15 MR. LAWSKY: Can you talk about those
16 discussions?
17 THE WITNESS: I was aware that they were
18 negotiating the ability to pay our employees
19 for 2008 -- I was aware that they were
20 negotiating.
21 MR. LAWSKY: Do you remember the meeting
22 with Fleming about this topic in particular?
23 THE WITNESS: I do not.
24 MR. LAWSKY: You didn't have a separate
25 meeting about it; it just came up as one of

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2 say, is that the number in the merger agreement was
3 a cap?
4 A. Yes.
5 Q. And you could go lower, but you couldn't
6 go higher.
7 A. Correct.
8 Q. And with respect --
9 MR. LEVANDER: You could always vary a
10 provision with the consent of the other side,
11 but without Bank of America's consent you
12 couldn't go over cap.
13 Q. I don't see anything in here
14 particularly about the timing issue, but you
15 also -- is it fair to say that you also had the
16 right to have bonuses paid after December 31?
17 Let me put that question in a slightly
18 different way. There was nothing in the merger
19 agreement that required you to pay out bonuses by
20 December 31, 2008; is that right?
21 A. My understanding of the way this works
22 -- I'm obviously not a lawyer -- is that this was
23 providing for bonus payments prior to the deal
24 closing -- whenever that might be -- and so the
25 timing of the bonus payments would be tied to the

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2 transactions closing, which was expected to be on
3 or about the 31st, but the 31st itself isn't the
4 operative date.
5 Q. The last sentence of Section 5.2 says
6 "The allocation of the 2008 VICP among eligible
7 employees shall be determined by the company in
8 consultation with parent." Is the concept of
9 consultation one that you were familiar with prior
10 to entering into this agreement?
11 MR. LEVANDER: I'm not sure what you
12 mean by that.
13 A. I don't know how to answer that. I
14 understand the meaning of the word "consultation."
15 Q. Had you experienced other deals where
16 you had a right to consult on an issue prior to a
17 merger?
18 A. I don't really remember. I have only
19 been involved in a relatively small number of
20 mergers. In the case of the merger of the New York
21 Stock Exchange and Euronext, I don't remember if
22 there was a particular provision in which we had
23 the right of consultation or not.
24 Q. What was your understanding of what Bank
25 of America was entitled to do pursuant to its right

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2 of consultation?
3 A. I don't think that was the way we worked
4 with them. We were not operating under what their
5 technical rights were. They were acquiring us.
6 Our behavior with them was complete transparency.
7 They provided input to what the ultimate number
8 was; they changed the mix of cash and stock -- we
9 changed it at their request -- and they had access
10 to name-by-name compensation figures. So they were
11 an integral part of the process of determining both
12 what the ultimate pool size was and what
13 individuals got. Now, technically, of course, our
14 Compensation Committee ultimately approved the
15 bonus pool, but they had complete access to the
16 information and could provide input on it.
17 MR. LEWIS: When you say they had
18 "access," can you be more specific? Was it
19 Andrea Smith, Steele Alphin; was it other
20 people?
21 THE WITNESS: It was primarily Andrea
22 Smith and Steele Alphin because that was
23 their jobs, but any of the other Bank of
24 America people, if they asked for
25 information, would get it. And so Neil

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2 Cotty, who was the acting CFO, and Joe Price,
3 who was Bank of America's CFO -- we were in
4 the mode of anything they wanted to see we
5 would provide to them.
6 MR. LAWSKY: Do you know whether Neil
7 Cotty and Joe Price, in addition to Andrea
8 Smith and Steele Alphin, were getting that
9 kind of individual data?
10 MR. LEVANDER: About bonuses.
11 MR. LAWSKY: About bonuses.
12 THE WITNESS: I don't know.
13 MR. LAWSKY: That was a very compound
14 question. Do you personally know whether any
15 of them got that kind of data, one by one?
16 Because you said you don't know as to all
17 four.
18 THE WITNESS: Andrea Smith had
19 name-by-name bonus information.
20 MR. LAWSKY: Did you talk to her
21 directly about that?
22 THE WITNESS: Yes. For certain
23 individuals.
24 Q. And we'll get back to that. One thing I
25 want to understand. I understand that if someone

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2 reached out to you and asked you a question, you
3 would answer the question. Were there any
4 employees at Bank of America that affirmatively
5 said, This is what we're doing with comp bonus
6 payments?
7 A. I had an explicit conversation with
8 Steele Alphin on the aggregate bonus pool and on
9 the cash/stock mix, and Andrea Smith was provided
10 with name-by-name numbers at least for some subset
11 of the employee base.
12 Q. I want to step away from the merger
13 agreement for a second and get some general
14 understanding of the way Merrill Lynch had
15 historically allocated bonuses prior to 2008.
16 MR. LEVANDER: You understand he comes
17 to Merrill Lynch December of 2007.
18 MR. MARKOWITZ: Yes, I do.
19 Q. I'm assuming that you spoke to people
20 about how things were done historically, and if you
21 have no idea you can answer so.
22 Do you have an understanding of how
23 bonuses were paid historically?
24 A. Not to any significant degree.
25 Q. Well, how about, do you have an

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2 internally what we expect the quarter to be,
3 but that also gets constantly refined. So
4 whatever happens every single day changes
5 what the expectation is for the quarter.
6 Q. As you mentioned, there were a series of
7 Comp Committee meetings in the fall and December of
8 2008 where the number gradually came down a few
9 times. Do you have a recollection of any of those
10 meetings in particular?
11 A. Not specifics so that I can say on
12 such-and-such a day we had the following
13 such-and-such discussion.
14 Q. As the number was coming down during the
15 fall and December of 2008, what was the reason for
16 the constant takedown, so to speak?
17 A. Two primary drivers: One was the
18 continued decline in the expectation for what the
19 industry was going to do, and the second was the
20 continued decline in Merrill's performance.
21 Q. And is there a third -- and by that, is
22 there a third, in that is Bank of America, through
23 any of its employees, asking you to lower the bonus
24 pool?
25 A. The answer is, they are providing input

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2 to us on the size of the bonus pool and on the
3 cash/stock mix. So I had a specific conversation
4 with Steele Alphin where he expressed the view that
5 they would like the bonus pool to be less than the
6 expense number, less than $3.5 billion, which I
7 agreed with.
8 Q. Where was Merrill at the time that you
9 had this conversation with Mr. Alphin?
10 A. My recollection is that we were already
11 moving there, so there was no real difference
12 between where we were moving anyway and where he
13 had expressed their desire for us to be. The
14 specific change that they asked us to do on the
15 cash/stock mix was at their request. We would not
16 have changed the 60/40 to 70/30 other than they
17 asked us to.
18 Q. Why did they ask you to do that?
19 A. Again, you're asking me to speculate.
20 You should really ask them that.
21 Q. Did Mr. Alphin tell you why?
22 A. I don't recall a specific conversation
23 with him. However, the two reasons that I
24 generally recall are: One is that moving to a
25 higher percentage of cash moves more of the expense

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2 that took place on November 11, 2008?
3 A. Not specifically because these materials
4 were prepared and revised numerous times.
5 Q. If you could just turn your attention to
6 page 55, which is the year-end calendar, I see here
7 it says on December 31 "cash awards distributed."
8 Do you see that entry?
9 A. I do.
10 Q. What does that make reference to?
11 A. I believe that is the payment of the
12 cash portion of the VICP pool.
13 Q. So by this time, had it been decided
14 that Merrill Lynch would pay out the cash
15 components of its bonus before the year end?
16 A. When you say "decided," the expectation
17 was that the bonuses would be paid prior to the
18 deal closing; the expectation was that the deal
19 would close on or about December 31, and this
20 document is consistent with that.
21 Q. When did you first have the expectation
22 that payments would be made before the deal
23 closing?
24 A. When we signed the merger agreement and
25 the schedule to the merger agreement.

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2 look. Ultimately, the mortgage area was run by
3 Mike Nierenberg, but he was not there for the full
4 year.
5 Q. The mortgage area, was it called
6 "mortgage"?
7 A. Yes. But there are other places that
8 are mortgage-related assets, so there is commercial
9 mortgages and there are -- historically, there were
10 a couple of proprietary groups that held
11 mortgage-related assets. Then there is also a
12 credit area that had credit-related assets, and
13 there are also historically a couple of proprietary
14 groups that have credit-related assets. So that's
15 why it's easier to think about it as mortgage and
16 mortgage-related assets and credit and
17 credit-related assets rather than each of the
18 individual groups.
19 Q. We were trying to go through earlier
20 this morning the progression of coming up with the
21 bonus pool. When did Merrill Lynch come up with
22 its bonus pool for 2008 bonuses?
23 A. The bonus pool was finalized at the Comp
24 Committee meeting on December 8 and ratified by the
25 board.

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2 Q. Did you participate in that meeting?
3 A. I did.
4 Q. And with respect to the December 8
5 meeting, what was the final pool that was decided
6 upon?
7 A. The final pool was approximately $3.2
8 billion.
9 Q. And you're speaking in terms of expense?
10 A. Right. With a 70/30 cash/stock split.
11 Q. And I have, from information provided by
12 Bank of America, something that says $2.5 billion
13 in cash and $3.62 billion total pool. Does that
14 sound about right to you?
15 A. That sounds about right.
16 Q. As of December 8, where was Merrill
17 Lynch with respect to its year-to-date losses?
18 A. I don't know the number off the top of
19 my head because I don't happen to know exactly what
20 that number was. We would have had
21 October-November results and a couple of days in
22 December.
23 Q. Would you have projected results to
24 date?
25 A. I don't think you meant to ask it that

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2 estimate losses were going to be?
3 A. First of all, the bonus recommendations
4 are the responsibility of the Comp Committee. But
5 to the best of my recollection, I would have known
6 where we stood as of that point in time when we
7 were making those recommendations.
8 MR. LAWSKY: Is there a projection on
9 here for what the end of the year will be?
10 Is that what that is, or is that where you
11 are as of November 8 -- the 19 and the 32
12 number.
13 THE WITNESS: It appears to me to be the
14 year-to-date estimate.
15 MR. LAWSKY: To November 8th.
16 THE WITNESS: Correct.
17 MR. LAWSKY: Is there a projection in
18 here for the year where you're going to end
19 up?
20 THE WITNESS: Not unless I page through
21 this, I'm not going to know that.
22 MR. LAWSKY: Do you recall when you went
23 into the November 8 meeting, had your team
24 worked out an estimate of what you thought
25 things would look like at the end of the

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2 year?
3 THE WITNESS: As of this date, December
4 8th, we were estimating the quarter to be
5 approximately -- to the best of my
6 recollection, as of this date, we were
7 estimating the quarter to be approximately
8 $14 billion loss pretax, approximately $9
9 billion loss after tax.
10 MR. LAWSKY: So then you would have had
11 a yearly estimate in your head, as well,
12 since you already know the first three
13 quarters. You add the 14 to the three
14 quarters previous, which I think -- were you
15 down 5 after the first three?
16 THE WITNESS: No.
17 MR. LAWSKY: Were you around 26 for the
18 year then?
19 THE WITNESS: I don't want to guess.
20 MR. LAWSKY: Do you remember?
21 THE WITNESS: I don't remember the
22 number. I remember the quarter number. But
23 you're correct; you could just add them up.
24 Q. So the actual fourth quarter loss was
25 about $15 billion?

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2 A. After tax.
3 Q. So it actually went down a little bit --
4 strike that.
5 You didn't have the number yet as of
6 December 8; you had just year-to-date through
7 November in terms of $19 billion here?
8 A. No. You're mixing up the numbers. This
9 number appears to me to be the quarter to date.
10 You then asked me a question about what the
11 estimate for the fourth quarter was as of this
12 date, which I told you my recollection is $14
13 billion pretax, $9 billion after tax. The final
14 number for the fourth quarter was ultimately,
15 approximately $21 billion pretax, $15 billion after
16 tax.
17 Q. Understood.
18 MR. LAWSKY: Let's stop there for a
19 second because I missed this. So the
20 estimate on December 8 was 14 pretax; it ends
21 up at 21 pretax. So the $7 billion delta,
22 how do you explain that difference? Or you
23 just couldn't predict what was going to
24 happen with the rest of December.
25 THE WITNESS: Right, right.

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2 is determined to reward performance and to retain
3 people, and those numbers would have no impact
4 either on individual performance or on retention.
5 Q. Did you, at any time between December 8
6 and December 31, say, "Wait a minute, we have
7 billions of dollars in losses more than we thought.
8 We need to rethink our bonus determination"?
9 A. We did not change our bonus
10 determination substantially -- in any significant
11 way -- after December 8.
12 Q. Did you consider changing the bonus
13 determinations after December 8 as a result of
14 worsening earnings?
15 A. Again, I'm going to repeat what I said
16 before. Because of the $2.3 billion and the $650
17 million that were not related to any individual
18 performance or any retention element, the answer is
19 no.
20 Q. So you didn't even consider it?
21 A. We did not consider changing the bonus
22 pools after December 8th.
23 Q. Did you advise anyone from Bank of
24 America of the deteriorating financial condition of
25 Merrill Lynch between December 8 and December 31?

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2 A. Bank of America had daily access to the
3 exact same financial information that I had.
4 MR. LAWSKY: Access is different -- and
5 I understand your answer; I just want to draw
6 down on it a little bit -- access is
7 different than sort of having conversations
8 with you or your guys. Was that also
9 happening in terms of you updating them on
10 how things were going?
11 A. The acting chief financial officer, Neil
12 Cotty, sat in meetings and discussions and was
13 totally up-to-speed as to what was happening.
14 MR. LEVANDER: That impairment of good
15 will, is that a cash item or a non-cash item?
16 THE WITNESS: Non-cash item.
17 Q. Did anyone from Bank of America between
18 December 8 and December 31, either to you directly
19 or to your knowledge, suggest that Merrill Lynch
20 should further reduce its bonus pool from where it
21 had been established?
22 A. Not to my recollection or knowledge.
23 Q. Did you have any discussions about that
24 topic with anyone from Bank of America even if they
25 didn't say that you should lower it?

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2 carrying -- I don't know what the exact number was
3 -- $50 billion, $60 billion, $70 billion worth of
4 cash. The availability of cash was never an issue.
5 Q. Were the bonus awards that was
6 determined on December 8 at all impacted by your
7 understanding that Merrill would be taken over by
8 Bank of America?
9 A. I can't answer that because the bonuses
10 and the ability to pay the bonuses were tied to the
11 transaction. If we hadn't done the transaction
12 with Bank of America, we would have done something
13 else. And the bonus levels were determined based
14 upon what was necessary to both reward and retain
15 the franchise.
16 Q. I just want to go back. With respect to
17 the timing issue, who at Bank of America did you
18 have conversations with about the timing?
19 A. The timing --
20 Q. Meaning, the December 31 payout as
21 opposed to the following year.
22 A. The timing, as we talked about before,
23 was determined when we signed the merger agreement.
24 The timing was contemplated then, in September, to
25 be prior to the close, and the expectation was

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2 always that the close would be on or around
3 December 31.
4 MR. LAWSKY: Why? I'm still not clear
5 on why it was important to go in December
6 rather than January with the bonuses.
7 THE WITNESS: When you say December or
8 January, whether it was December 31 or
9 January 1 or 2, that isn't particularly
10 relevant. It was relevant that the bonuses
11 be paid prior to the closing, so that the
12 bonuses would be determined by the business
13 people who were running the businesses for
14 the entire year.
15 MR. LAWSKY: But Bank of America could
16 have figured out with your help, I assume,
17 bonuses in January for the prior year. They
18 had access to the books, as you said.
19 THE WITNESS: This was part of the deal
20 that they and we negotiated.
21 MR. LEVANDER: He's already testified
22 that by their requesting that it go from
23 60/40 to 70/30, they were trying to get more
24 expense in Merrill's fourth quarter than
25 their first quarter.

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1 J. A. Thain
2 if we do this at the same time; we're going to be
3 one company, and this way all of our combined
4 employees get their payments at the same time?
5 A. I don't recall any such discussion.
6 Q. Did you have any discussion that there
7 might be some integration issues if some employees
8 were getting paid ahead of other employees?
9 A. No. We really didn't have that
10 discussion -- to the best I can recollect. We did
11 have discussions along the lines of lining up
12 levels of compensation to not create those
13 integration problems. As a matter of fact, Andrea
14 Smith suggested some specific changes to accomplish
15 exactly that, to line up compensation levels, but
16 there was never a discussion as to the timing.
17 MR. LAWSKY: I'm getting lost on the
18 time line a little with Andrea Smith. When
19 you're saying she's making suggestions to
20 particular people's numbers and aligning
21 things, is that pre to the December 8 Comp
22 Committee meeting where the board gives
23 thumbs-up to the numbers?
24 THE WITNESS: To the best of my
25 recollection, no, it's after. The pool gets

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1 J. A. Thain
2 set on December 8, and then the individual
3 numbers get set after that over the course of
4 the next week or so.
5 MR. LAWSKY: And it was in that process
6 where she had a look-see at everyone's
7 number, and she was having input into them?
8 THE WITNESS: Correct. She didn't
9 necessarily have a look at everyone's number,
10 but she had access to everyone's number.
11 MR. LEVANDER: Did she have input before
12 December 8?
13 THE WITNESS: She was part of the
14 discussions of the bonus levels. I don't
15 remember her specific input.
16 MR. LAWSKY: This is news to me. I
17 didn't realize -- I thought everything was
18 set; as of the December 8 meeting the board
19 votes. But you're saying now there is a week
20 lag where the pool is set, but the individual
21 numbers are still getting worked out.
22 THE WITNESS: Yes. That's actually one
23 of the reasons why the numbers turn out to be
24 slightly different than the numbers that get
25 approved on December 8 because when you do

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1 J. A. Thain
2 the individuals it doesn't come out exactly
3 right.
4 MR. LAWSKY: And then you have to go
5 back to the board with those individual
6 numbers or back to the Comp Committee?
7 THE WITNESS: Certain individual numbers
8 get approved at a final Comp Committee
9 meeting, which was sometime in December.
10 Q. Did Andrea Smith ever sit down with you
11 before the end of 2008 and indicate to you what
12 certain types of employees make at Bank of America
13 in certain types of positions?
14 A. Yes.
15 Q. For example, a Bank of America equity
16 analyst would make about this kind of money -- that
17 type of a thing.
18 A. Yes. It wasn't equity analyst -- but
19 Bank of America HR person, Bank of America Risk
20 person. Yes.
21 Q. Which categories did she go through with
22 you?
23 A. I don't recall specifically, but it was
24 things like REDACTED .
25 Q. And did you then compare that in your

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1 J. A. Thain
2 own mind with what -- strike that.
3 Did you share with Andrea Smith what the
4 comparable people at Merrill made in those
5 positions?
6 A. Yes.
7 Q. And how did it shake out?
8 A. This discussion is what led to certain
9 changes in the comp numbers where we typically
10 brought the Merrill number down to be more in line
11 with the Bank of America number -- I'm sorry, one
12 other area which I just remembered is the
13 Communications and PR area.
14 Q. But in each of the areas, as a general
15 matter, the Merrill employees in the same positions
16 were earning more than the Bank of America people
17 in the same positions?
18 A. You can't make that blanket statement,
19 but in the infrastructure parts of the business
20 that was generally true.
21 MR. LAWSKY: Did Andrea Smith focus in
22 on any particular people, do you recall,
23 whose numbers she thought were too big?
24 THE WITNESS: She did --
25 MR. LAWSKY: Or too small?

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1 J. A. Thain
2 THE WITNESS: I don't recall any of them
3 being too small. Yes. She did have some
4 individuals who she thought were high, who we
5 changed and brought down.
6 MR. LAWSKY: Who do you remember of
7 those people?
8 MR. LEVANDER: I've been directed not
9 to disclose, by the company, individual names
10 other than the names of the top people who
11 are under Section 16. We were directed by
12 Bank of America counsel. If you want to get
13 on the phone with Mr. Liman --
14 MR. LAWSKY: If you don't want to tell
15 us the names, you can just say "I don't want
16 to tell you the names."
17 MR. LEVANDER: He has no problem telling
18 the names. We were directed by counsel for
19 Bank of America, and I'm following that
20 direction.
21 MR. LAWSKY: I'm asking, Do you want to
22 give us the names?
23 MR. LEVANDER: He's given you the
24 category --
25 MR. LAWSKY: I'm not asking you for the

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1 J. A. Thain
2 numbers that people got. I'm asking who
3 Andrea Smith asked numbers to come down for.
4 Are you telling me Bank of America doesn't
5 want you to disclose that?
6 MR. LEVANDER: That's my understanding,
7 but I'll tell you what. At the next break
8 I'll try to find out if that's what the
9 direction was.
10 MR. LAWSKY: Let the record reflect the
11 witness is refusing to answer.
12 MR. LEVANDER: At direction of counsel
13 -- at the direction of Bank of America's
14 counsel.
15 MR. LAWSKY: I'm not calling Mr. Liman
16 because it's your deal with him, but if you
17 can work that out it would be great.
18 (Exhibit 4 was marked for
19 identification.)
20 Q. I'm handing you what's been marked as
21 Exhibit 4 --
22 MR. LAWSKY: Let me follow up with one
23 thing: Was it your understanding that Miss
24 Smith was speaking with, if you know, with
25 Mr. Alphin regularly based on your

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1 J. A. Thain
2 Liman's objections are. All I know is, he's
3 given me a direction. Mr. Thain has
4 confidentiality obligations even though he's
5 an ex-employee; those exist. Therefore,
6 let's go on.
7 MR. LAWSKY: Let me try to understand a
8 few things. Have you entered into any type
9 of severance agreement with Bank of America?
10 THE WITNESS: I have not.
11 MR. LAWSKY: So with respect to -- and
12 earlier, were you, in fact, asked to leave?
13 Is that the correct characterization?
14 THE WITNESS: Yes.
15 MR. LAWSKY: Post departure, has there
16 been any -- even if not in writing -- any
17 sort of agreements or joint agreements or any
18 kind of cooperation agreement with Bank of
19 America?
20 THE WITNESS: Not with me.
21 Q. I want to switch gears a little bit and
22 go back to the fourth quarter losses. Did you ever
23 consider whether Merrill Lynch should disclose its
24 losses to its investors?
25 MR. LEVANDER: In what period of time?

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1 J. A. Thain
2 MR. MARKOWITZ: The fourth quarter of
3 2008.
4 A. Merrill Lynch, as a policy, doesn't make
5 projections, doesn't give guidance and doesn't
6 disclose interim results.
7 Q. And a lot of firms have that and depart
8 from that policy in times when there's a serious
9 deviation, and given the deviation that was
10 occurring in the fourth quarter of 2008, did you
11 consider whether or not it was appropriate to make
12 a disclosure?
13 A. The market conditions were generally
14 known, and we would not have disclosed interim
15 results in that fourth quarter.
16 Q. So you did not consider doing that?
17 A. That discussion topic of interim results
18 was one that comes up periodically, but we
19 maintained that since we don't give guidance, and
20 since we don't give projections, and since we don't
21 disclose interim results, that it would not have
22 been appropriate to do so then.
23 Q. Did the issue come up in the fourth
24 quarter of 2008 of whether or not it was
25 appropriate to disclose the losses that were

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1 J. A. Thain
2 accumulating on the books?
3 A. I don't recall any specific discussion
4 about that topic.
5 Q. How about a general recollection?
6 A. There was some discussion about the
7 results, and there is a discussion every Monday
8 about the results, which include our general
9 counsel. So there are always ongoing discussions
10 about our results, but I don't recall any specific
11 discussion about do we need to disclose.
12 Q. Did anyone approach you and say, "I
13 think we've got to make an announcement about where
14 we were given the quarter"?
15 A. No. Not to my recollection.
16 Q. Did anyone discuss whether -- strike
17 that.
18 Did you consider whether Merrill Lynch
19 should disclose its departure from prior practice
20 in issuing bonuses before the end of the calendar
21 year?
22 MR. LEVANDER: I'm not sure what the
23 departure of prior practice was. If you want
24 to ask the question whether they considered
25 disclosing the payments of bonuses in

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1 J. A. Thain
2 December on or about December 31, that's
3 fine.
4 A. I don't recall any discussion about
5 disclosing the timing of payments of the bonuses.
6 Q. Did you consider disclosing that you'd
7 issue the bonuses -- made compensation bonus
8 awards, and several billions in additional losses
9 had accrued after setting those bonuses?
10 A. Ask the question again, please?
11 Q. Did you consider disclosing after
12 December 8, and you had set bonus awards, that
13 bonus awards had been set, and since that time
14 there had been several billion dollars in losses?
15 A. I don't recall that discussion at that
16 time.
17 Q. Is that something that you think an
18 investor would want to know?
19 A. Investors were aware that we were
20 accruing bonuses, and, as I said before, we don't
21 make projections, we don't give guidance, and we
22 don't release interim results.
23 Q. Do you think investors would want to
24 know that you set bonuses based on a number even
25 though you knew there were multiple billions of

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1 J. A. Thain
2 dollars in losses that incurred after you set the
3 number?
4 A. I'm going to answer the same way.
5 Investors were aware that we were accruing bonuses,
6 and we don't disclose interim losses as a matter of
7 policy.
8 Q. Investors knew that you were accruing
9 money for bonuses, but they didn't know that you
10 were going to pay them out early, did they?
11 A. The concept of paying it out early, as I
12 said before, we never contemplated disclosing the
13 timing of the payment of the bonuses.
14 Q. Let me ask the question in a more
15 neutral way: Would an investor in Merrill Lynch
16 have an understanding that Merrill Lynch would be
17 paying bonuses before the end of calendar year
18 2008?
19 A. Since the investors were aware that we
20 were accruing bonuses, and the investors would be
21 aware of the P and L impact of those payments, I
22 don't see that the specific timing is relevant.
23 MR. LAWSKY: Let's draw a little simple
24 line. If that's what's going on in the
25 economy in general, wouldn't an investor want

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1 J. A. Thain
2 and Bob McCann.
3 Q. And what was the thinking behind
4 awarding that group of people a strategic
5 transition payment?
6 A. The discussion of that as an option,
7 which, as I said before, was ultimately rejected,
8 was compensating the senior executives for
9 executing a transaction that was in the best
10 interest of Merrill shareholders.
11 Q. And you supported the payments?
12 A. No. It was a discussion we had, and in
13 the end, I recommended to the board that I receive
14 no bonus. We then had a discussion about the other
15 four members, and in the end, I and they also
16 recommended that they receive no bonus.
17 MR. LAWSKY: Do I have this right? So
18 the five people you're willing to talk about
19 today all got no bonuses?
21 Q. The conversation of these strategic
22 transition payments started in November; is that
23 right?
24 A. I don't recall exactly but sometime in
25 that time frame.

Exhibit D
-------------------------------------------------------------
-------------------------------------------------------------
EXAMINATION of KENNETH LEE LEWIS,
taken at the State of New York, Office of the
Attorney General, 120 Broadway, New York, New
York, on February 26, 2009 at 4:30 p.m., before
SARA FREUND, a Shorthand Reporter and a Notary
Public of the State of New York.

Page 5
1 K.L. Lewis
2 Q. Do you have any questions at this time?
3 A. No.
4 MR. MARKOWITZ: Counsel, please identify
5 your appearance.
6 MR. LIMAN: Lewis Liman, James Wyatt,
7 Trisha Lawson and Catharine Slack for the
8 witness.
9 MR. MARKOWITZ: Thank you, Counsel.
10 Q. Could you please state your Social
11 Security number for the record?
12 A. REDACTED .
13 MR. MARKOWITZ: Counsel, I know we've
14 been having a discussion about if Bank of
15 America will provide a list of the top 200
16 bonus recipients of Merrill Lynch, and I just
17 want to be clear that Bank of America is
18 refusing to do that.
19 MR. LIMAN: Let me do something on the
20 record. We had reached an agreement with the
21 office of the attorney general to produce
22 information in redacted form, which we did.
23 MR. LAWSKY: Which information did you
24 produce?
25 MR. LIMAN: Some bonus information in

Page 6
1 K.L. Lewis
2 redacted form, which we did several weeks ago
3 following a conversations with the attorney
4 general's office. We did receive a request
5 the other day. We have refused to produce
6 it. We will produce information if the
7 attorney general's office agrees to keep it
8 private and confidential and agrees to the
9 court order that is currently in place.
10 Q. With respect to the court order that's
11 in place, I believe yesterday several attorneys --
12 or at least an attorney from the New York attorney
13 general's office, I think it was Ben -- offered
14 that any production of specific information would
15 be maintained subject to the temporary
16 confidentiality order put in place by Judge Fried
17 on Tuesday.
18 MR. LIMAN: If you're agreeing that that
19 could be made permanent then we should
20 discuss it.
21 MR. LAWSKY: What do you mean "made
22 permanent"?
23 MR. LIMAN: Meaning that you will
24 propose the order staying in place, and we
25 will have authority to enforce the order.

Page 7
1 K.L. Lewis
2 MR. LAWSKY: Do you mean staying in
3 place regardless of what the court does?
4 MR. LIMAN: Correct. I understand
5 you're challenging the order. If you decide
6 not to challenge the order and to agree to
7 what the judge has put in place, then we will
8 take it back and confer with the legal staff
9 at Bank of America, and I believe we will be
10 able to produce the information.
11 MR. MARKOWITZ: Just to be clear, we're
12 not challenging anything right now. The
13 order was a temporary order that was put in
14 place to allow you to make an application
15 regarding confidentiality, and what we are
16 doing is saying subject to the time when you
17 can seek a court order of confidentiality
18 order we would agree to keep it confidential
19 to preserve your rights.
20 MR. LIMAN: That's what I understand.
21 To those circumstances we are not agreeing to
22 produce the document, the unredacted
23 information.
24 MR. LAWSKY: On what grounds?
25 MR. LIMAN: Do we need to waste the

Page 8
1 K.L. Lewis
2 witness's time?
3 MR. LAWSKY: No. But let's just do
4 this. Frankly, if you lose in court, you're
5 going to have to give it to us anyway.
6 MR. LIMAN: So I'll address it in court.
7 MR. LAWSKY: Fair enough. I don't want
8 to waste your time. We're going to serve you
9 with a subpoena now.
10 MR. LIMAN: That's fine.
11 THE WITNESS: We got off to a great
12 start.
13 MR. LAWSKY: We're asking for this
14 information from your lawyers for a long
15 time, Mr. Lewis. It's surprising it hasn't
16 been provided.
17 MR. LIMAN: That, actually, is not true
18 at all.
19 MR. LAWSKY: The letter was 2 1/2 weeks
20 ago.
21 Q. Mr. Lewis, I have some questions about
22 the Bank of America merger with Merrill Lynch. Did
23 there come a time when you considered undoing the
24 merger between Bank of America and Merrill Lynch?
25 A. Yes.

Page 9
1 K.L. Lewis
2 Q. When did you first consider doing that?
3 A. I want to make sure I get the date
4 right. I'm pretty sure it was December the 13th --
5 if that's a Sunday because I was in New York, and I
6 was about to go home -- and what triggered that was
7 that the losses, the projected losses, at Merrill
8 Lynch had accelerated pretty dramatically over a
9 short period of time, as I recall, about a week or
10 so.
11 Q. How did you come to learn of that?
12 A. Joe Price, our CFO, called me.
13 Q. Take me through what Mr. Price
14 communicated to you on that call.
15 A. He basically said what I just said: The
16 projected losses have accelerated pretty
17 dramatically. We earlier on had more days in the
18 month, so that it was a possibility that at least
19 some of the marks could come back, but now we had
20 not very many business days because Christmas was
21 coming and all of that. So we became concerned
22 just of the acceleration of the losses.
23 Q. What did Mr. Price tell you about the
24 extent of the losses, basically?
25 A. He just talked about the amounts.

Page 10
1 K.L. Lewis
2 Q. And what were they as of the time you
3 spoke to Mr. Price?
4 MR. LIMAN: To the extent that you
5 remember.
6 A. To the extent that I remember, the
7 losses had accumulated to about $12 billion after
8 tax.
9 Q. Anything else?
10 A. That was the whole focus.
11 MR. LAWSKY: Were you getting a daily P
12 and L at the time?
13 THE WITNESS: We were getting
14 projections. I was getting a P and L at Bank
15 of America, but we were getting projections.
16 I don't recall getting them every day, but I
17 was either hearing about them and in some
18 cases I saw them.
19 MR. LAWSKY: Can you explain, when you
20 say a conversation with Price is what got you
21 thinking this way, if you were getting these
22 P and L's over time, what was it about the
23 Price conversation which put you over the
24 edge?
25 THE WITNESS: Just that that amount --

Page 11
1 K.L. Lewis
2 I'm not sure I was getting them every day. I
3 don't recall getting them every day because
4 they were projections, not daily P and L's.
5 So the concern was, we had had a forecast on
6 December 5th, as I recall, of $9 billion, but
7 $3 billion pretax was a plod (phonetic) just
8 for conservative reasons; so what you saw was
9 basically a 7 to 12 if you could go through
10 the plod, and then you get to the $12
11 billion. So a staggering large percentage of
12 the original amount in a very short period of
13 time.
14 MR. LAWSKY: Just so the record is
15 clear, I have your calendar in front of you,
16 although you don't -- Counsel produced it.
17 December 14 was on a Sunday. It says "depart
18 to arrive 3:30." You're in New York leaving
19 that day?
21 MR. LAWSKY: So is that the day you have
22 the meeting with Price?
23 THE WITNESS: Not a meeting, a phone
24 call.
25 MR. LAWSKY: So Sunday, December the

Page 103
1 K.L. Lewis
2 REDACTED
6 REDACTED
7
8
9
10
11
12 Q. As of this time -- we spoke a little
13 earlier about the Merrill Lynch 2008 bonus pool.
14 When was the first time that you learned that
15 Merrill Lynch decided to pay out its 2008 bonuses
16 before 2009?
17 A. I don't remember the exact time.
18 Q. About?
19 A. I don't remember.
20 MR. LAWSKY: How did you learn that?
21 THE WITNESS: Steele Alphin told me.
22 MR. LAWSKY: And what do you recall
23 about that conversation?
24 THE WITNESS: I recall that he said that
25 he attempted to get them not to do that, but

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1 K.L. Lewis
2 that the board and John and the Compensation
3 Committee had done it.
4 MR. CORNGOLD: So it had happened
5 already.
6 THE WITNESS: Yes.
7 MR. CORNGOLD: So we're talking after
8 Thanksgiving, do you believe?
9 THE WITNESS: I don't remember the exact
10 date. Again, we were in the midst of issues
11 with the economy and with the breakdowns.
12 MR. LAWSKY: Are you saying you wanted
13 Merrill Lynch to pay out the bonus pool after
14 the quarter ended end of December and pay it
15 out in January?
16 THE WITNESS: First of all, that's our
17 practice, and, secondly, to the best of my
18 recollection, there were conversations by
19 Steele, and, I was told, by Andrea, to get
20 them to do it like we do it.
21 MR. LAWSKY: Andrea Smith, you mean?
23 MR. LAWSKY: And those conversations, to
24 your knowledge, predated their doing it on
25 December 8th?

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1 K.L. Lewis
2 THE WITNESS: To the best of my
3 knowledge. Yes.
4 MR. LAWSKY: Prior to December 8th did
5 you have an expectation that Merrill Lynch
6 would be paying bonuses in January?
7 THE WITNESS: It wasn't a focused,
8 conscious assumption that they would, but I
9 would have expected them to until they made
10 their decision.
11 MR. CORNGOLD: Was it a practice in the
12 industry to pay bonuses after the end of the
13 year?
14 THE WITNESS: Actually, I don't know
15 what others do. I just know what we do, and
16 we pay them on February 15.
17 MR. CORNGOLD: You don't know whether
18 other financial entities pay them before?
19 THE WITNESS: I do not.
20 MR. CORNGOLD: Have you ever heard of
21 paying out bonuses before you know what your
22 year end actually looks like?
23 THE WITNESS: I've heard it, but not
24 investment banks. I've heard about
25 commercial banks doing that.

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1 K.L. Lewis
2 MR. CORNGOLD: They didn't stop him.
3 THE WITNESS: The way I've had our
4 ability is described as this: In the first
5 negotiations there was a ceiling set on how
6 much they could pay. Then I was told that we
7 could advise or consult -- I forgot the right
8 word -- but we could not actually make a
9 decision for them. That's reenforced -- what
10 I've been told -- that as long as a company
11 is a public company with a separate board and
12 separate committees, that you cannot be
13 perceived as running the company; therefore,
14 you cannot be making decisions on their
15 behalf.
16 MR. CORNGOLD: What would happen if you
17 were perceived as running the company?
18 THE WITNESS: I was told -- I don't
19 know if it's not legal or it's against some
20 security law. I've always been instructed
21 that you cannot be perceived to --
22 MR. LIMAN: I'm asking not to get into
23 conversations you had with counsel.
24 MR. LAWSKY: But isn't it true that you
25 sent a message to Thain that he was not to

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1 K.L. Lewis
2 take a bonus higher than yours?
3 THE WITNESS: No. I did not send that
4 message. All that I remember about that is,
5 Steele related to me that there was a first
6 conversation about -- please give me license
7 on the number -- but a conversation about a
8 $40 million bonus not tied to the company's
9 loss, but tied to the deal getting done. I
10 don't know all that happened, but I was told
11 that -- I don't know if Steele did it or
12 Andrea -- he was told very strongly that you
13 should not do that; that you would damage
14 yourself with the Bank of America board if
15 you do that, and if you ever wanted a chance
16 to be in the running for my job then that
17 would eliminate it.
18 MR. CORNGOLD: Did you have an
19 understanding that he was told that about
20 when the bonuses would be determined, when
21 the total bonus would be determined?
22 THE WITNESS: I don't know that. Then
23 sometime after that -- I don't know how the
24 progress was made or whatever -- I was told
25 that there was an agreement that he should

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1 K.L. Lewis
2 make something less than me, and then,
3 subsequently, as things got worse and worse,
4 I told our board that nobody in our team
5 would get anything. I think that was like
6 nine people, I think. I think he did it with
7 maybe two, three or three, four.
8 MR. CORNGOLD: You understood
9 specifically what the threat was to Mr. Thain
10 expressed about his bonus; is that correct?
11 THE WITNESS: The threat --
12 MR. CORNGOLD: The threat if you take
13 the 40 it's going to look bad for the board.
14 THE WITNESS: That's what Steele related
15 to me -- I don't know if he or Andrea related
16 -- that was relayed to him that that would
17 not be acceptable to our board. He would not
18 have a chance to succeed me if he did.
19 MR. CORNGOLD: But you don't know if
20 that threat was made with respect -- and
21 "threat" may be a bad word.
22 MR. LIMAN: You could say "if that
23 message would be conveyed" or something.
24 MR. CORNGOLD: If those consequences
25 were told to Mr. Thain about when the bonuses

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1 K.L. Lewis
2 would be set and delivered.
3 THE WITNESS: I don't know. All I
4 remember is that -- again, I don't remember
5 if it was Steele or Andrea -- but they were
6 pushing him to follow a methodology where he
7 would pay them after.
8 MR. CORNGOLD: Did you say to either of
9 them in words or substance, Tell him that if
10 he pays the bonuses before January 1st,
11 that's going to adversely affect his position
12 with Bank of America's board?
13 THE WITNESS: I did not tell them that,
14 and I don't know how strongly they said it,
15 but I was told they were saying it pretty
16 strongly.
17 MR. CORNGOLD: With respect to his
18 bonus, you knew what they were saying with
19 respect to his bonus, correct?
21 MR. CORNGOLD: But you didn't know what
22 they were saying with respect to the over $3
23 billion in bonuses that were being set for
24 everybody else at Merrill Lynch?
25 THE WITNESS: No. I was told that

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1 K.L. Lewis
2 Andrea was helping John look at those
3 bonuses, but I don't know anything more.
4 MR. CORNGOLD: And you knew that the
5 expression of the consequences to Mr. Thain
6 was successful in getting him to change his
7 decision about his own bonus, correct?
8 MR. LIMAN: Would you mind asking him an
9 open-ended question?
10 MR. CORNGOLD: I though I was asking an
11 open-ended question. I guess I don't know
12 what an open-ended question is.
13 MR. LIMAN: "Did you know" --
14 THE WITNESS: I don't know -- the $40
15 million bonus to one person when you had a
16 loss clearly would have destroyed with our
17 board. And so that's pretty severe.
18 MR. CORNGOLD: But you didn't think that
19 $3-plus billion bonuses set before the
20 company knew what the results were going to
21 be for the company would have the same impact
22 with your board?
23 THE WITNESS: I don't know what they
24 said. I don't know how strongly they said --
25 all I know is, I was told that they urged him

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1 K.L. Lewis
2 very strongly not to pay them early. I don't
3 know if they gave consequences like that.
4 MR. CORNGOLD: You didn't tell them to
5 give consequences like that?
6 THE WITNESS: No.
7 MR. LAWSKY: We had other testimony that
8 the early payment of the Merrill bonuses was
9 contemplated back in September when the deal
10 was struck. Is that false?
11 THE WITNESS: I have no recollection of
12 time of payment.
13 MR. LAWSKY: Being an issue in the
14 initial negotiations.
15 THE WITNESS: Right.
16 MR. LAWSKY: Were you involved in those
17 negotiations?
18 THE WITNESS: No.
19 MR. LAWSKY: Were you involved in the
20 September negotiations in general?
22 MR. LAWSKY: Were you involved at all in
23 the negotiations over the bonus provision
24 with regard to the $5.8 billion?
25 THE WITNESS: I was not.

Page 115
1 K.L. Lewis
2 THE WITNESS: First of all, you start
3 with a portion of it that's predate because
4 you have guarantees and signing bonuses, etc.
5 I don't know enough about their individual
6 contracts to know how many of those there
7 were --
8 MR. CORNGOLD: It wasn't relevant --
9 MR. LIMAN: Let him finish.
10 MR. CORNGOLD: If I ever interrupt you
11 before you finish an answer, please make sure
12 that you finish the answer.
13 THE WITNESS: -- so you have guarantees,
14 signing bonuses, and then there are
15 individuals that you would be vulnerable to
16 losing that would cause your revenue
17 projections for the following year to be
18 diminished.
19 (Recess was taken.)
20 Q. Staying on the topic of the Merrill
21 Lynch bonus payments, after you learned -- you have
22 the Joe Price conversation that we started talking
23 about in the beginning of today's testimony where
24 you learned about the fourth-quarter deterioration
25 at Merrill, do you revisit the issue at all, or do

Page 116
1 K.L. Lewis
2 you visit the issue of Merrill Lynch bonuses?
3 A. No. Again, put it in context of that
4 issue, again, seeing the market deteriorating
5 within our own company, seeing losses going up
6 rising pretty rapidly, and beginning to wonder if
7 we needed to cut our dividend. That's the context
8 in which I was operating.
9 Q. That's why I don't understand. The
10 question being, given year-end bonuses, bonuses are
11 supposed to be based on -- to my understanding --
12 year's performance. You were learning that the
13 year performance was going to be significantly
14 worse than it had been before. Did you reach out,
15 or have your people reach out to the Merrill people
16 saying, You got to knock the number down?
17 A. I don't know if we did or we didn't, but
18 I was concerned about some pretty big things going
19 on.
20 REDACTED
21
22
23
24
25

Page 117
1 K.L. Lewis
2 Q. I'm talking -- the bonuses weren't paid
3 until December 31st.
4 A. Right. My point is, if you could think
5 about the context in which I was operating, I was
6 not thinking about when bonuses were paid.
7 Q. How about the amount of bonuses that
8 were going to be paid?
9 A. I wasn't thinking about bonuses.
10 Q. Were you thinking about the integration
11 of Merrill Lynch and Bank of America?
12 A. Some, but more about these other things.
13 MR. CORNGOLD: Even in December of 2008
14 wasn't $3.5 billion a material number?
15 THE WITNESS: I'm not saying it wasn't
16 material. I'm saying I had people that I
17 trusted and had great confidence in handling
18 the issue -- and who I know are very
19 conservative people.
20 Q. And they were working with John Thain to
21 bring those numbers down? Is that your
22 understanding?
23 A. It was my understanding that Andrea was
24 making a lot of progress in getting the numbers to
25 him.

Page 137
1 K.L. Lewis
2 THE WITNESS: No. But I couldn't tell
3 you for a fact that it is.
4 Q. Do you recognize Miss Morrow's
5 signature?
6 A. I don't remember seeing a full signature
7 of Randall. I do recognize these law firms.
8 MR. LAWSKY: I want to switch to the
9 Merrill bonuses, the individual names. You
10 were saying you don't know anyone on here. I
11 believe your testimony is -- correct me if
12 I'm wrong -- the only bonuses you would
13 personally be aware of for 2008 would be
14 direct reports to you, and they all got zero.
15 THE WITNESS: I may know somebody on
16 there.
17 MR. LAWSKY: You can't match them up --
18 you can't match their bonus. If I named your
19 top investment banker, could you tell me what
20 bonus he got?
21 THE WITNESS: I couldn't tell you where
22 he was on that.
23 MR. CORNGOLD: Does Bank of America have
24 a policy with its employees that the
25 employees are required to keep their

Page 138
1 K.L. Lewis
2 compensation confidential?
3 THE WITNESS: I don't know if we do or
4 we don't.
5 MR. CORNGOLD: You've been an employee
6 of Bank of America at various banks for --
7 THE WITNESS: Almost 40 years.
8 MR. CORNGOLD: Are you aware of any
9 policy ever that you were instructed to keep
10 your compensation confidential?
11 THE WITNESS: That I was?
12 MR. CORNGOLD: Yes. As an employee.
13 MR. LIMAN: His is publicly recorded.
14 MR. CORNGOLD: I mean previous to when
15 it was publicly recorded. I'm asking have
16 you ever signed a confidentiality agreement?
17 THE WITNESS: No. I would think I was
18 supposed to keep my compensation
19 confidential.
20 MR. CORNGOLD: Have you ever given
21 anyone instruction to keep their compensation
22 confidential?
23 THE WITNESS: No.
24 MR. CORNGOLD: In the 40 years that you
25 have been at Bank of America?

Page 139
1 K.L. Lewis
2 THE WITNESS: Not that I recall.
3 MR. CORNGOLD: Have you ever
4 participated in negotiating bringing in
5 people from another bank to Bank of America?
6 THE WITNESS: Yes.
7 MR. CORNGOLD: And have you ever
8 negotiated compensation with the person that
9 you were bringing in from another bank?
10 THE WITNESS: Yes. But it was a long
11 time ago.
12 MR. CORNGOLD: Today, in the last three
13 years, you don't participate in bringing in
14 high-level people to Bank of America for
15 negotiations?
16 THE WITNESS: Yes. But I wouldn't be
17 talking about compensation.
18 MR. CORNGOLD: You would discuss with
19 other people at Bank of America what
20 compensation you should offer?
22 MR. CORNGOLD: And when you make those
23 discussions, are you generally aware of
24 compensation that they are receiving at other
25 banks?

Page 160
1 K.L. Lewis
2 MR. LIMAN: Why don't you wait and see?
3 MR. LAWSKY: I just want to put one
4 thing on the record. I just want to tell Mr.
5 Lewis, I think you're making a big mistake by
6 not turning over the list to us. I want to
7 be direct about it. For what my opinion is
8 worth, we have agreed to accept that list
9 under the terms of the judge's temporary
10 order, which means it will be held
11 confidential. It's important to us, and we
12 see no valid basis for not turning it over to
13 us. That's why we went to the next step of
14 giving you a subpoena. We prefer to do this
15 not that way, so I would ask you maybe on
16 your flight home or whenever, to reconsider
17 and think about that because I think it would
18 be a much better route to go down.
19 THE WITNESS: The only thing that I'm
20 concerned about is our associates. Wouldn't
21 it be a pretty big violation of trust to
22 invade somebody's privacy like that?
23 MR. CORNGOLD: Either a court is going
24 to rule finally that the materials should be
25 kept confidential or it shouldn't. If the

Page 161
1 K.L. Lewis
2 court rules that they should be kept
3 confidential, we're just delaying it. If the
4 court rules not, we're also just delaying it.
5 MISS LAWSON: Why don't you just agree
6 to a confidentiality agreement?
7 MR. CORNGOLD: Because we think it
8 doesn't need to be kept confidential.
9 MISS LAWSON: You think it would be
10 appropriate to publish those names and
11 incomes in The Wall Street journal?
12 MR. LAWSKY: I didn't want to invite a
13 debate on this right now. I appreciate your
14 opinion. I just want to urge Mr. Lewis
15 directly to think about it.
16 THE WITNESS: That's my only issue.
17 (Page break for jurat.)
18
19
20
21
22
23
24
25

Exhibit E
-------------------------------------------------
-------------------------------------------------
EXAMINATION of ANDREA SMITH,
taken at State of New York, Office of the Attorney
February 12, 2009 at 2:10 p.m., pursuant to a
Subpoena, before SARA FREUND, a Shorthand Reporter
and a Notary Public of the State of New York.

Page 30
1 A. Smith
2 MISS ANDREADIS: Or whether she was
3 aware that that was a consideration.
4 A. That was not a deciding factor when Mr.
5 Thain and I were looking at the organizational
6 alignment. It was focused around the businesses,
7 so, Here's commercial banking that will now be a
8 division reporting to you, Mr. Thain. David
9 Darnell was the man that ran that. Here is the
10 skill set that he has. Are there other people with
11 that particular skill set that we should evaluate,
12 or should David Darnell be the person running that
13 business?
14 Q. In addition to this working with Mr.
15 Thain, did you have any role with respect to the
16 allocation of Merrill Lynch's 2008 incentive
17 compensation?
18 A. I did not have a role in the allocation
19 process.
20 Q. Were you updated frequently, or were you
21 made aware of the process at all? Did you have any
22 knowledge of the process?
23 A. I did have knowledge of the process.
24 Q. Okay. Let's start with your first
25 knowledge of the process.

Page 31
1 A. Smith
2 A. The first knowledge I had about the
3 process that they were going to use was in the
4 first half of November, which was when I discovered
5 that they were going to be paying out prior to the
6 1st of the year.
7 Q. So prior to November 2008, describe even
8 in general any type of knowledge that you had. Did
9 you have any type of knowledge at all other than
10 they were Merrill Lynch bonuses going to be paid
11 out?
12 A. I believe that the end of October or the
13 1st of November I had a conversation with Mr. Thain
14 around how much the incentive accrual was in their
15 financial plan, and at that time he told me roughly
16 $750 million dollars a quarter, and so I said,
17 "Okay, then $3 billion would be the starting point
18 of your incentive accrual," and he said, "We'll
19 need more than that." And then I was talking to
20 Mr. Alphin, and that's when I learned that there
21 was an amount that had been talked about in the
22 merger deal.
23 Q. So going back to when Mr. Thain told you
24 about the approximately $3 billion and he said he
25 needed more, could you please describe that

Page 42
1 A. Smith
2 intimated that it would. At that point, we
3 still didn't know there had been a meeting
4 prior to Mr. Alphin and Mr. Thain speaking.
5 MR. MARKOWITZ: By the time of your
6 debriefing -- let me ask it in a different
7 way. Did Mr. Thain tell Mr. Alphin when they
8 met that he just had this call?
9 THE WITNESS: He did not.
10 MR. MARKOWITZ: And did Mr. Alphin
11 express -- when did Mr. Alphin come to learn
12 about the call?
13 THE WITNESS: When I found out about it
14 the next day and shared that fact with Mr.
15 Alphin.
16 MR. MARKOWITZ: Did you get debriefed,
17 find out and call again? What was the
18 sequence of events?
19 THE WITNESS: Mr. Alphin debriefed me on
20 his conversation with Mr. Thain. The next
21 day, in Charlotte, as I thought how are we
22 going to -- it's November 11th or 12th, and
23 based on the debriefing that Mr. Alphin gave
24 me on paying out in December, how in the
25 world are the Merrill Lynch people going to

Page 43
1 A. Smith
2 do that? So I'm going to call Mr. Thain's
3 current direct reports. I called Greg
4 Fleming, "How are you all going to pay at the
5 end of December when you haven't even started
6 the process." He said, "Did you not know
7 that we had a meeting?" I said, "I did not
8 know." He said, "Have you seen the minutes?"
9 And I said, "I haven't seen anything." At
10 that time, Michael Ross, their Compensation
11 head, e-mailed that document, which then I
12 shared with our head of compensation, Mark
13 Behnke, and Steele Alphin.
14 MR. MARKOWITZ: What was Mr. Alphin's
15 reaction when you let him know this call had
16 taken place?
17 THE WITNESS: Surprise, I think.
18 MR. MARKOWITZ: What did he say?
19 THE WITNESS: I don't recall exactly
20 what he said, but I do recall giving him the
21 document.
22 MR. MARKOWITZ: Was he upset? Was it
23 the kind of thing he would have wanted to
24 know about before it happened?

Page 44
1 A. Smith
2 MR. MARKOWITZ: Was there anything along
3 the lines of, We discussed all these things,
4 and Mr. Thain or John -- however you referred
5 to him -- didn't even mention that?
6 THE WITNESS: I don't recall that
7 specific conversation with Mr. Alphin when I
8 gave him the document, but I do recall with
9 Mr. Behnke, we had been been planning and
10 assuming a January time line for payout and
11 working quite closely with the Merrill Lynch
12 Compensation team; so this was big news for
13 us. And the fact that the Compensation team
14 at Merrill Lynch hadn't shared that with Mr.
15 Behnke was annoying for all of us, quite
16 frankly.
17 MR. MARKOWITZ: You have been through, I
18 take it, several of these processes of
19 allocating year-end bonuses before all of
20 this occurred; is that right?
22 MR. MARKOWITZ: And how long have you
23 been with Bank of America?
24 THE WITNESS: Almost 21 years.
25 MR. MARKOWITZ: So you should have a

Page 60
1 A. Smith
2 financial performance of the company.
3 Q. Did you ever discuss a specific number
4 with Mr. Thain or Mr. Alphin?
5 A. I did not discuss a specific number with
6 Mr. Thain, other than to say that I thought it
7 should be lower. With Mr. Alphin, prior to his
8 meeting with Mr. Thain, I don't recall that we
9 landed on a specific number, but I had shared the
10 $750 million a quarter accrual that Mr. Thain had
11 told me.
12 Q. When you told Mr. Thain that you wanted
13 to get the number lower -- I know that you said you
14 didn't have a specific number in mind -- but was
15 there a range? Did you want to take it down a
16 couple of million? What were you thinking at the
17 time?
18 A. I just thought that, again, based on the
19 financial performance, that we should continue to
20 look for opportunities to bring that number down.
21 I did not have a firm number in my head or even
22 give him one. But as we talked about that, one of
23 the things I said is, comparable positions at Bank
24 of America will be getting paid much less, and
25 without going into name specific or anything, just

Page 61
1 A. Smith
2 to say I think it would be wise to use this process
3 as a way to get Merrill Lynch pay more aligned to
4 Bank of America.
5 Q. What was his reaction to that?
6 A. He generally thought that was a good
7 idea, and at the same time wanted to be fair to the
8 Merrill Lynch associates.
9 Q. Can you expand on that little bit?
10 A. For example, I recall using an example
11 of someone in a role at Merrill Lynch that got paid
12 three dollars, and that same role in Bank of
13 America would have gotten paid one dollar. So that
14 in order to -- as part of our going forward
15 integration, that I thought it would be wise to
16 begin to bring pay down, so that ongoing
17 expectation could be more in line when we reset
18 what pay levels would be than having a giant gap
19 between what they had been paid and what I thought
20 the new pay schedule could look like in Bank of
21 America.
22 Q. Were those conversations ongoing after
23 the November 11 and 12 time frame?
24 A. Yes. That's really when they started in
25 earnest.

Page 67
1 A. Smith
2 attended the shareholder meeting on December
3 5th.
4 MR. MARKOWITZ: Again, could you explain
5 a little more what these particular meetings
6 were that week?
7 THE WITNESS: That week, as I recall,
8 the Merrill Lynch team was going through
9 their final recommendations of year-end
10 incentives, and I had told John that I
11 thought it would be a good idea -- because I
12 did the examples that I just gave you,
13 different roles and potential price points,
14 and he agreed that that would be a good idea.
15 So that week I met with Greg Fleming, and,
16 again, I didn't know the Merrill Lynch
17 people, but I just used illustrative
18 positions and pay to say you know these
19 people; you've been running this business.
20 Let me try to give you some context of what
21 similar roles would be paid at Bank of
22 America. I did that with Greg Fleming. I
23 sat down with Peter Kraus who showed me sort
24 of -- with Michael Ross -- here were the
25 pools. And during that week, Mr. Thain asked

Page 68
1 A. Smith
2 Mr. Fleming to take down his pool under $100
3 million.
4 Q. Did you learn that from Mr. Thain or
5 through Mr. Fleming?
6 A. I learned that from Mr. Kraus who told
7 me Mr. Thain was trying to get in touch with Mr.
8 Fleming, and I, in fact, was going to Mr. Fleming's
9 office to do the review I just described. So Mr.
10 Kraus told me Mr. Thain had not connected with Mr.
11 Fleming. He said, "Would you mind just telling him
12 Mr. Thain is calling?" I did, in fact, tell Mr.
13 Fleming Mr. Thain is calling, "and the reason he's
14 calling you is to actually bring your pool down
15 under $100 million."
16 MR. MARKOWITZ: Did you have any
17 understanding as to why Mr. Thain did that?
18 THE WITNESS: No. Because I did not
19 talk to Mr. Thain at that point.
20 MR. MARKOWITZ: When you were meeting
21 with these various executives and giving them
22 the feel for different types of people,
23 different types of positions at Bank of
24 America, were they reciprocating and saying,
25 Okay, if this type of banker at Bank of

Page 86
1 A. Smith
2 specific day.
3 MR. MARKOWITZ: Did you come to learn
4 that anyone at Bank of America considered or
5 contemplated that the Merrill Lynch bonus
6 pool should be further reduced in light of
7 the fourth quarter losses at Merrill?
9 MR. MARKOWITZ: Would there be anyone
10 besides yourself and Mr. Alphin who would
11 have been the people to have those
12 conversations?
13 THE WITNESS: Not to my knowledge.
14 MR. MARKOWITZ: Was anything put in
15 place with respect to the bonuses -- well,
16 let's see how the quarter is going, so we can
17 appropriately set the year-end bonuses?
18 THE WITNESS: I'm sorry. At Merrill
19 Lynch.
20 MR. MARKOWITZ: Well, with respect to
21 your role in the Merrill Lynch bonus
22 allocation, did you ever say, Hey, we should
23 set up something so we can take a look at
24 what Q4 looks like to make sure we got the
25 year bonuses right?

Exhibit G
------------------------------------------------------
------------------------------------------------------
EXAMINATION OF JOHN D.
FINNIGAN, taken at the State of New York, Office of
the Attorney General, 120 Broadway, New York, New
York, on March 3, 2009 at 10:00 a.m., before SARA
FREUND, a Shorthand Reporter and a Notary Public of
the State of New York.

Page 39
1 J.D. Finnigan
2 determination at a board meeting in the middle of
3 January and pay out sometime thereafter.
4 Q. Why would it be in January? Why
5 wouldn't it be in the previous year?
6 A. Because Merrill traditionally determined
7 bonuses and paid them out after their calendar year
8 results were available.
9 Q. Is that to get a better understanding of
10 the firm's financial performance?
11 A. It seemed consistent with the fact that
12 bonuses are based on calendar year performance.
13 Q. You mentioned a few seconds ago some
14 sleuthing around in trying to get compensation.
15 Can you just elaborate on what --
16 A. Our HR people would see what they could
17 find out from other HR people and see what they can
18 find out from their executive compensation
19 consultants. They would take a look at what the
20 stock award was and come up with some estimate of
21 where they thought the people would come out. It
22 wasn't 100 percent precise. You also knew what the
23 performance of the firm was versus the prior year.
24 There were always rumors on the Street about --
25 Q. Rumors on the Street about what?

Page 50
1 J.D. Finnigan
2 Q. So when did John Thain come to you and
3 ask you to move up the bonus payments?
4 A. We had a meeting of the management
5 Compensation Committee on November 11. He set out
6 a timetable of how we would pay bonuses for the
7 year in view of what he anticipated to be a
8 year-end merger.
9 Q. And what was your reaction to Mr.
10 Thain's proposal?
11 A. As a practical matter, if we were going
12 to close at year end and the committee was going to
13 make the determinations, then the committee had to
14 make the determinations in December.
15 Q. Was there any resistance by you or any
16 other members of the committee paying out before
17 the end of the year?
18 A. No. I don't remember any.
19 MR. MARKOWITZ: Was it your
20 understanding that Merrill Lynch had an
21 obligation to finalize its bonus payments
22 before the merger was completed?
23 THE WITNESS: My understanding was the
24 merger agreement provided for Merrill Lynch
25 to award bonuses in 2008, so it was Merrill

Page 52
1 J.D. Finnigan
2 company.
3 Q. What else happened on this November
4 11th -- was it a call with the Compensation
5 Committee and with Mr. Thain?
6 A. Yes, it was.
7 Q. Was it a scheduled meeting?
8 A. No. I think the original intent of the
9 meeting was for Rosemary Berkery, general counsel,
10 to bring the committee up to speed on the request
11 from your office and Congressman Waxman on what had
12 occurred, and John then suggested while we're
13 having the meeting that he'd like to add to the
14 meeting an agenda or two. One was the timetable,
15 and two was he brought us up to date on the
16 proposed bonus accruals for the year.
17 Q. Do you recall what the proposed accruals
18 were at that time?
19 A. From reading the document it looks like
20 they were about what they were on December 8, the
21 final accrual numbers.
22 Q. Who's Rosemary Berkery again?
23 A. General counsel.
24 Q. And what do you recall that she
25 mentioned regarding --

Page 159
1 J.D. Finnigan
2 Q. Mr. Finnigan, a few minutes ago you
3 referenced in regard to TARP money a line of
4 credit. Could you elaborate on that for a moment?
5 A. I'm not an expert on this. We reserved
6 the right to access $10 billion of TARP money in
7 case the deal didn't go through. We never received
8 any money, and we never took it. I think Bank of
9 America ultimately took our allocation. I'm not an
10 expert on TARP. We didn't get any money in the
11 end.
12 Q. But you had access to it; is that
13 correct?
14 A. I think it was provided to us in terms
15 of the commitment. I think that we never intended
16 to take it, but we did reserve the right to $10
17 billion in case -- I don't think we caveated the
18 reservation this way, but in case something
19 happened to the deal we didn't want to give it up.
20 Again, that's an exact recollection of what
21 happened.
22 Q. Were there any discussions or board
23 meetings about accessing the line of credit between
24 October to the end of the year?
25 A. No. I think every intention was, I

Exhibit H
---------------------------------------------------------
---------------------------------------------------------
---------------------------------------------------------
---------------------------------------------------------
CONTINUING EXAMINATION of STEELE ALPHIN, taken
at the State of New York, Office of the Attorney
General, 120 Broadway, New York, New York, on March
4, 2009 at 11:00 a.m., before SARA FREUND, a
Shorthand Reporter and a Notary Public of the State
of New York.
Page 28
1 S. Alphin
2 company, and then we would look at how we retain
3 those people through compensation or other ways,
4 and that's going to be compensation to even
5 guarantees -- which we didn't do, but that's done
6 in the industry.
7 Q. Just discussing for a moment with regard
8 to the aggregate bonus pool, let's talk about the
9 segment of the discretionary portion of that pool.
10 What was your understanding of what you and Andrea
11 Smith could do in that regard in your discussions
12 with Merrill Lynch?
13 A. Zero. They could spend all of it.
14 Q. That was your understanding, that you
15 were not permitted to make any suggestions or
16 recommendations?
17 A. We can't.
18 Q. What was your understanding of the right
19 to confer coming out of the merger agreement?
20 A. That I can consult, advise and discuss,
21 but, ultimately, John Thain and his directors had
22 full authority to pay any monies that would be paid
23 for the performance.
24 MR. MARKOWITZ: Could you tell Mr. Thain
25 -- did you think you were able to tell Mr.

Page 71
1 S. Alphin
2 leader would. I think that's a normal
3 leadership trait. I think that would be very
4 normal for a person to think that in that
5 manner.
6 MR. LAWSKY: Since you raised it, let's
7 talk about Mr. Thain's own bonus for himself.
8 I know, and we think you'll agree, it's an
9 evolving process over several months. So
10 maybe you tell us, as you recall that
11 evolution, the first time you have a
12 REDACTED discussion with him. At one point it was ,
13 then it's , then it's . Why don't you
14 take us, your best recollection, from the
15 beginning of your hearing about his desire
16 for a bonus for himself.
17 THE WITNESS: If you give me latitude
18 about specific dates because, as I mentioned
19 before, this was an ongoing dialogue that I
20 would have with John about this issue.
21 MR. LAWSKY: And to the extent you can,
22 if you can even ballpark it for us, it would
23 be helpful.
24 THE WITNESS: That's fair. The first
25 time I ever met with John, we talked about

Page 72
1 S. Alphin
2 compensation -- which would have been very
3 soon after the actual deal -- and the
4 conversation then was around no one has a
5 change of control agreement; that's good.
6 What are your expectations; what are your
7 thoughts on Greg Fleming, Bob McCann and
8 others?
9 MR. LAWSKY: Who was saying that, you or
10 Thain?
11 THE WITNESS: I'm asking John that. If
12 these are key people, how do we keep them
13 here? And then, during that dialogue, we
14 talked about Fleming, McCann, and then John
15 said, And myself, I would expect to be paid
16 -- the exact comment was this: "My board is
17 going to pay me somewhere around REDACTED

18 this year," and my comment was REDACTED
" and then it was REDACTED
That led into the
22 conversation of, "John, going forward in our
23 company, that's not the type of pay you
24 should expect if you want to consider a role,
25 that's not what it's going to be; that's not

Page 73
1 S. Alphin
2 our philosophy paying" --
3 MR. LAWSKY: Was this all in the first
4 conversation?
5 THE WITNESS: Yes. This was a long
6 conversation in his office. I'll try to
7 change when I go to the next conversation. I
8 said, "That's not our philosophy, and we
9 won't do that." The comment to me was,
10 "Well, I really think I'm worth that; I think
11 I've done exactly what my board asked me to
12 do. I tried to clean up problems there, and
13 I have delivered a $29-or-so stock price to
14 the shareholder. I've done my job." I
15 firmly believe that John believes that; in
16 his mind he believes that's what he did. I
17 said, "I can't make that decision; that's not
18 my decision to make. But I can tell you,
19 going forward that's not the type of
20 compensation your going to see if you want to
21 be part of Bank of America, particularly next
22 year which is probably going to be a very
23 difficult year." I said, REDACTED
REDACTED
-- just as a

Page 105
1 S. Alphin
2 Andrea Smith communicate to you that she had
3 been telling John Thain about the timing?
4 THE WITNESS: She really didn't because
5 she communicated to me she and John were
6 continuing to have dialogue about taking the
7 gross amount down, but we did not talk
8 anymore about the changing of the timing. We
9 considered that a decision made; the decision
10 was not ours; it was within the boundaries of
11 the agreement, and our only approach there
12 was let's make sure we try to get the amount
13 paid looked at critically or as hard as we
14 could. That's what we did.
15 MR. MARKOWITZ: Did you ever let Mr.
16 Thain know that you're unhappy with this
17 decision with respect to timing?
18 THE WITNESS: I expressed my concern of
19 what was going on, and I said, "I think these
20 things, if we do this, this will force us to
21 deal with some of these issues."
22 MR. MARKOWITZ: I want to switch back
23 gears a little bit and ask about some of the
24 conversations we had earlier about Mr. Thain
25 seeking a bonus for himself. Did there come

Page 106
1 S. Alphin
2 a time when you told Mr. Thain that if he
3 were to seek a bonus for himself then he
4 wouldn't be in line or be considered to
5 succeed Ken Lewis?
6 THE WITNESS: I told John that if he
7 were paid more than Ken, that our board would
8 clearly look at it as an aberration, and that
9 he should be aware of that and have a sense
10 of -- I told him, I said, "John, you have
11 public problems -- you already see that --
12 and this could potentially create a problem
13 with our board."
14 MR. MARKOWITZ: Understood. But did you
15 go the next step and say, If you do this
16 there would be no chance of you to be able to
17 succeed Ken Lewis at Bank of America?
18 THE WITNESS: I don't recall telling him
19 that.
20 MR. MARKOWITZ: How about some other
21 kind of consequence, like there wouldn't be a
22 future for you at Bank of America?
23 THE WITNESS: No. Because, at that
24 point, I still thought there was a future for
25 John in the bank. What I expressed to John

Page 107
1 S. Alphin
2 was that our board would view that he had a
3 bigger divide to go over to become more of a
4 commercial -- having a commercial view on
5 compensation. Because I told John, "In our
6 company we don't pay people for the merger.
7 Ken's never been paid for a merger the year
8 it's done or in advance. So in our company
9 you would be paid when this is successful,
10 when the shareholder benefits from it."
11 MR. MARKOWITZ: Is this the strongest on
12 any of these issues that you pushed back,
13 sort of the statement along the lines if you
14 end up getting paid more than Lewis it's
15 going to be viewed as an aberration by the
16 board?
18 MR. MARKOWITZ: Did you ever consider
19 kind of taking that approach with respect to
20 the timing issue?
21 THE WITNESS: I didn't because that was
22 a decision that was made by the board within
23 the legal parameters of the agreement. This
24 was more simply advice that I was trying to
25 offer him as his HR executive.

Page 117
1 S. Alphin
2 some point prior to October 31.
3 MR. LAWSKY: Right around there.
4 THE WITNESS: Yes.
5 MR. LAWSKY: That's the conversation
6 where you bring the retention?
7 THE WITNESS: That's correct. That's
8 just a retention conversation at that point.
9 MR. LIMAN: That's the conversation
10 where it's off the table.
12 MR. LIMAN: Prior to October 31, at some
13 point proximate to but prior to.
14 Q. Did you ever discuss with John Thain
15 incentive compensation with regard to individual
16 employees?
17 A. He did dialogue with me about what he
18 was thinking about REDACTED and REDACTED .
19 They were the only two -- oh, excuse me, and
20 REDACTED .
21 Q. And when was the initial discussion with
22 Mr. Thain in this regard?
23 A. That would have been in November.
24 Q. And those discussions continued through
25 the early part of December, as well?

Page 118
1 S. Alphin
2 A. They did until there were some form of
3 recommendations, or until their board decided not
4 to pay John and the other executives.
5 Q. And if you can take us through those
6 discussions. In terms of the initial discussion,
7 was it at that point that Mr. Thain raised
8 REDACTED
11 A. What John expressed to me was what they
12 had been paid in previous years, and they were
13 important; we needed to retain both of them at that
14 point, and that we had to be somewhere close to
15 that, he felt like, to keep them on the team going
16 forward.
17 Q. When you're saying --
18 REDACTED
19
20
21
22
23
24
25 Q. Do you recall -- strike that.

Page 119
1 S. Alphin
2 What were the figures that Mr. Thain was
3 discussing with regard to Mr. Fleming an Mr.
4 McCann?
5 A. In the REDACTED -- REDACTED to
6 REDACTED -- we never talked about a specific
7 number.
8 Q. Did you discuss any other individual
9 employees in terms of their bonuses with Mr. Thain?
10 A. I didn't.
11 Q. Do you know if Andrea Smith did?
12 A. I do not know as a fact if she did or
13 she didn't.
14 Q. When you say "as a fact," do you
15 generally have a sense of whether or not Andrea
16 Smith did have that discussion?
17 A. I believe that in the role I asked her
18 to fulfill, yes, they would have had dialogue about
19 that.
20 Q. Did you ever ask Andrea Smith whether or
21 not she had dialogue --
22 A. No.
23 MR. LAWSKY: When you talk about the
24 REDACTED , did you know
25 it then and you don't recall it, or you never

Page 128
1 S. Alphin
2 at. I looked at monthly and quarterly
3 forecasts. At Merrill Lynch I only saw what
4 the forecast for the fourth quarter was
5 supposed to be. So really the only
6 information I have would have been a general
7 dialogue from Andrea or from people in the
8 business. But looking at a document and
9 going what the marks were and what the trade
10 losses were, I don't receive those documents;
11 I don't look at them.
12 MR. LAWSKY: Did you ever hear in
13 December of any particular positions that
14 Merrill had that created particular problems
15 within Merrill's financial health in
16 mid-December?
17 THE WITNESS: I did not hear of a
18 specific mark or a specific trade or a
19 specific piece of business. No, I did not.
20 MR. MARKOWITZ: Did you ever learn
21 during the fourth quarter in December that
22 things started to worsen?
23 THE WITNESS: I did. A few days before
24 our December discussion with our board about
25 the REDACTED , Ken expressed to me

Page 129
1 S. Alphin
2 that the numbers were deteriorating faster
3 than he'd ever seen, and he said they've gone
4 much past the $8 billion to $9 billion in
5 losses. At that point, they were in the
6 mid-teens.
7 MR. MARKOWITZ: So you learned about it
8 from Ken Lewis?
9 THE WITNESS: Yes.
10 MR. MARKOWITZ: REDACTED
13 MR. MARKOWITZ: REDACTED
15 THE WITNESS: A day or two before we had
16 that phone call, that fourth phone call.
17 Part of the challenge is, we have a board
18 call every Friday -- we had for several
19 months -- what are the conditions of the
20 market place. That's the challenge. But it
21 would have been in the December -- soon after
22 it. It would have been -- deterioration
23 really started after the second week.
24 MR. MARKOWITZ: How did you learn about
25 the MAC?

Page 139
1 S. Alphin
2 MR. MARKOWITZ: But the Comp function,
3 if I understand, reports to you.
4 THE WITNESS: That's correct.
5 MR. MARKOWITZ: Is there a particular
6 person in HR whose role that would be?
7 THE WITNESS: Mark Behnke runs that for
8 us.
9 MR. MARKOWITZ: Do you have an
10 understanding of how or whether when bringing
11 over talent from a competitor firm if Bank of
12 America gets information about what they were
13 making at the competitor firm?
14 THE WITNESS: Yes, we do. We ask --
15 sometimes we ask for the last year's W-2 --
16 and we have some sense of the market because
17 in this role, like all financial services,
18 there is some sense of what MDs would make;
19 associates would make; VPs would make;
20 bankers would make. We try to get much more
21 specific than that -- and, typically, we ask.
22 MR. MARKOWITZ: And do people typically
23 give it when you ask?
24 THE WITNESS: Interestingly enough, most
25 of them do.

Page 140
1 S. Alphin
2 MR. MARKOWITZ: With respect to your
3 sense of the market, how do you get a sense
4 of what the market is worth?
5 THE WITNESS: From people we lose who go
6 to a competitor at certain rate of pay and
7 whatever instruments to hook or retain them,
8 and also the intelligence we get just from
9 the various comp analysis we do on an annual
10 basis. Those are the two primary. You get a
11 lot from head hunters also. The head-hunting
12 firms can tell you that these are the things
13 that are occurring.
14 MR. MARKOWITZ: And do you have direct
15 contact with those?
16 THE WITNESS: Personally, I do not.
17 MR. MARKOWITZ: Would that be Mark, as
18 well?
19 THE WITNESS: Most of that would be Mark
20 Behnke and Rick Parsons, who runs our
21 recruiting function for the company.
22 MR. MARKOWITZ: When people leave and
23 they decide to go elsewhere, do they share
24 with you what their new comp structure is?
25 THE WITNESS: Some do. We like to have

Page 164
1 S. Alphin
2 judgment that he thought was the best way to
3 uphold.
4 MR. MARKOWITZ: How much in losses would
5 it cause you to decide to lower the pool?
6 THE WITNESS: I don't know how to answer
7 that question because my overriding the
8 position would always be this: If you lose
9 all the people the losses will be even
10 greater. No matter what they are at least
11 they're being managed, but if you lose the
12 people the losses would be greater. Then you
13 have to turn around and hire people and
14 probably hire them with a guarantee, so the
15 costs to the company would have been even
16 greater.
17 MR. MARKOWITZ: So you would have gone
18 with the Merrill Lynch I bank offer over the
19 Bank of America model after post merger.
20 THE WITNESS: I would have used that to
21 get to one company, yes. But after one
22 company and managing the company the way we
23 manage it, we would ultimately end up with a
24 Bank of America approach as transition, as I
25 mentioned earlier today.

Page 165
1 S. Alphin
2 MR. MARKOWITZ: Would that have occurred
3 in 2008 numbers or the next year?
4 THE WITNESS: Forward looking, '09 and
5 '10.
6 MR. MARKOWITZ: Is there a threshold of
7 when that crosses, when the numbers have to
8 be reflected regardless of the desire to keep
9 people?
10 THE WITNESS: Even in our company we
11 missed our numbers, but we still paid our
12 best performers in key roles; we still paid
13 them. I think in the marketplace, and I
14 think in this industry, you always have to
15 pay people to retain them as long as there
16 are options to do other things. And that's
17 what we're seeing today.
18 MR. MARKOWITZ: It sounds to me like
19 there's a difference between zero, which is
20 what the top five execs took and whatever
21 bonuses people were doled out, and a number
22 between zero or somewhere between zero and
23 what they got. The question is, would the
24 numbers have caused you post close would
25 additional losses to try to further reduce

Exhibit I
--------------------------------------------------------
--------------------------------------------------------
GREG FLEMING, taken at
the State of New York, Office of the Attorney
March 5, 2009 at 12:00 p.m., before SARA FREUND,
a Shorthand Reporter and a Notary Public of the
State of New York.

Page 67
1 G. Fleming
2 there was that it would be no bigger than 2007, and
3 that would be the ceiling, and Bank of America
4 would have -- we would run the process, and they
5 would consult with us but would be actively
6 involved, and the color was they were going to be a
7 significant part of this, but we would run it.
8 Q. This is you and Curl?
9 A. Me and Curl.
10 Q. Who else is in the room for that
11 discussion?
12 A. I think the only people in the room for
13 price, retention payments for FA's and for bonuses
14 are Curl and me.
15 MR. POLKES: It's reflected in the deal
16 docs.
17 Q. On this point, when you discussed the
18 pool over this weekend was there a discussion of
19 the timing of either setting the bonuses or paying
20 out the bonuses?
21 A. No. Dave, you have to remember, Sunday
22 afternoon I was on fumes. We were dealing with
23 major issues only. So I recall no discussion on
24 timing.
25 Q. Are those the three points: Price,

Exhibit N
CONTINUING EXAMINATION of JOHN ALEXANDER THAIN,
taken at the State of New York, Office of the
Attorney General, 120 Broadway, New York, New York,
on February 24, 2009 at 4:30 p.m., before SARA
FREUND, a Shorthand Reporter and a Notary Public of
the State of New York.

Page 202
1 J. A. Thain
2 A. Morgan Stanley.
3 Q. Who initiated the recruitment of
4 REDACTED
5 A. I don't remember who made the first
6 contact.
7 Q. At what point did it sort of get to your
8 level?
9 A. When she was seriously considering
10 coming.
11 Q. At the point it got to your level, had
12 there been a salary offer made to REDACTED
13 A. I don't remember.
14 Q. Did you participate in the negotiation
15 of the salary for REDACTED
16 A. I don't recall specifically.
17 Q. In those conversations, did REDACTED
18 disclose what she had been making?
19 A. She would have disclosed that to our HR
20 area prior to making an offer.
21 Q. And what is the purpose of that? Why
22 would she tell your HR what she was making?
23 A. So that we can gauge how our offer
24 compared to what she was currently being paid.
25 Q. Is there any aspect of that with respect

Page 216
1 J. A. Thain
2 Q. So if Morgan Stanley recruited -- before
3 we used the example of you recruiting someone from
4 Morgan Stanley. Let's say Morgan Stanley, while
5 you were there, was trying to recruit one of your
6 guys, and they say "How much are you making?" And
7 they say, "I was making ten dollars." Would that
8 be a problem with Merrill Lynch?
9 A. I said I don't remember. I don't know
10 if that's part of the policy or not.
11 Q. But you have an understanding that
12 that's what happens in the industry routinely,
13 correct, that people do disclose that?
14 A. Yes.
15 Q. I guess I'm curious, if it's such
16 proprietary information, why wouldn't there be
17 policies set in place at Merrill Lynch prohibiting
18 employees from disclosing information?
19 A. There might be. I just said I don't
20 know.
21 Q. Who would know?
22 A. Either the Legal Department or the HR
23 Department.
24 Q. But even if there was one, it sounds
25 like no one would be enforcing it; is that right?

Page 217
1 J. A. Thain
2 A. I don't think that's necessarily true.
3 Q. Are you aware of any time when someone
4 left, and there was a discussion of "Oh, they told
5 our Competitor X what they made, so we're going to
6 sue them under some provision"?
7 A. I'm not aware of any such circumstances.
8 MR. CORNGOLD: You've been in the
9 industry at various levels for many years.
10 Are you aware of ever being under any rule or
11 any instruction at any of your employers
12 where you were not allowed to disclose your
13 compensation?
14 THE WITNESS: I believe -- although I'm
15 not certain in the case of Merrill -- I
16 believe that many firms have provisions that
17 are intended to keep compensation
18 confidential.
19 MR. CORNGOLD: I'm not asking a
20 hypothetical question; I'm asking a specific
21 question. When you were -- we haven't gone
22 through your resume, but at any time when you
23 were not a Section 16 employee, are you aware
24 of being under any rules where you were not
25 allowed to disclose your compensation?

Page 249
1 J. A. Thain
2 someone got such a high payout, shows up and
3 then goes off to Hawaii?
4 THE WITNESS: No one said that to me
5 specifically.
6 MR. LAWSKY: But you're saying there was
7 chatter somehow about this.
8 THE WITNESS: I believe it was reported
9 in the press, but no one said this
10 specifically to me.
11 MR. CORNGOLD: Just to clarify. In your
12 recruiting of REDACTED , t h e i n f o r m a t i o n
13 about his pay and stock, that came from
14 REDACTED , t o y o u r k n o w l e d g e , c o r r e c t , h i s
15 REDACTED ?
16 THE WITNESS: Yes. But he would have
17 documentation that he could produce to verify
18 that.
19 MR. CORNGOLD: And your information
20 about what comparable people were making came
21 from Towers Perrin; is that correct?
22 THE WITNESS: I don't recall if they
23 specifically provided. I also had general
24 information about what the top trading talent
25 make on Wall Street.

Page 250
1 J. A. Thain
2 MR. CORNGOLD: Was there other
3 information about his compensation at Goldman
4 that would have been useful to you that you
5 didn't have available?
6 THE WITNESS: I don't know how to answer
7 that question. Not that I know of.
8 (Recess was taken.)
9 Q. Could you describe the circumstances
10 that led to Mr. Kraus coming onboard?
11 A. Mr. Kraus is also a very senior, very
12 experienced person on Wall Street. He has
13 experience both in investment banking and in wealth
14 management, and he was brought onboard in a
15 strategy role with the expectation that he would be
16 very valuable in the wealth management and asset
17 management side of the business.
18 Q. Did you participate in setting or
19 discussing his salary?
20 A. I was part of discussing his
21 compensation package, but it was also eventually
22 approved by the Compensation Committee and the
23 board.
24 Q. Where was he before Merrill?
25 A. He was at Goldman Sachs.

Page 251
1 J. A. Thain
2 Q. What was the comp that was set for him?
3 A. His total compensation package for 2008
4 was approximately REDACTED .
5 Q. And how did you go about setting his
6 comp?
7 A. It was a function of his prior
8 compensation levels and compensation levels for
9 comparable senior people of his experience and
10 ability.
11 Q. As to his REDACTED , did he
12 provide that to Merrill?
13 A. I'm not aware of what specific
14 documentation he provided.
15 Q. But did he let Merrill know, regardless
16 of what specific documentation, what he was making
17 a t REDACTED
18 A. Yes.
19 MR. LAWSKY: Do you recall when he came
20 onboard?
21 THE WITNESS: I believe he started in
22 September.
23 MR. LAWSKY: And do you know why so late
24 in the year?
25 THE WITNESS: He also had a garden leave

Exhibit O
------------------------------X
EXECUTIVE COMPENSATION
INVESTIGATION,
------------------------------X
120 Broadway
New York, New York 10005
March 5, 2009
10:00 a.m.
EXAMINATION BEFORE TRIAL
OF STEVE GOODMAN, the Witness herein,
taken by the office of the Attorney
General, pursuant to a Subpoena and
held before Kimberly Dean, a Notary
Public of the State of New York at the
above-stated time and place.

Page 26
1 Steve Goodman
2 A. There are compensation surveys in which
3 data is collected for a variety of companies and a
4 variety of industries and geographies. The survey
5 date that she would be doing would be getting
6 survey data regarding HR functions at other
7 companies.
8 Q. Do you know who that data is collected
9 from?
10 A. The data itself is collected directly
11 from the companies. So, the third party vendor or
12 whoever that might be, they send surveys of their
13 own confidential to individual companies and they
14 collect the data that they get from individual
15 companies and then they compile the overall data
16 for those companies to use.
17 Q. If I understand this correctly, Bank of
18 America uses a third party who collects data from
19 other companies?
20 A. That's my understanding. Again, I am
21 not a compensation expert. That's my understanding
22 of how it works.
23 MS. ANDREADIS: Do you know if Bank of
24 America supplies these third party vendors
25 with information on Bank of America's

Page 27
1 Steve Goodman
2 compensation as well?
3 A. Yes, I would say so. Again but because
4 I have never done the process myself, I don't know
5 for sure but I think that's part of the price for
6 admission so to speak. It's two prices for
7 admission, you pay for surveys. I think part of it
8 the expectation is you will participate as well.
9 Q. Do you know the name of any companies
10 that Bank of America has used to collect this data?
11 A. I know of companies we used in the past
12 but I would not want to guess the companies we are
13 using in the last year or two or three because it
14 may have changed.
15 Q. The companies that you know of, when
16 were they last used?
17 A. That's what I'm saying. I don't know
18 exactly when.
19 Q. What are the names of the companies you
20 are aware of?
21 A. If I think of a traditional compensation
22 companies, they are companies like McLoggin, Mercer
23 Consulting. Again, to be honest, I don't know if
24 those were who we were using. If you asked me to
25 name the top accounting firms I could give you the

Page 29
1 Steve Goodman
2 range or how is it presented?
3 A. Generally, by the time I have been
4 provided with information for my compensation
5 partner they have taken all sorts of data and
6 boiled it down into a summary that I can
7 understand.
8 In terms of the exact format that they get it
9 in, I am not familiar. In terms of in general, how
10 it could be boiled down for me? It usually would
11 be on job levels and ranges, yes.
12 Q. When you say job levels, is that just a
13 title or is it more with a description of the job?
14 A. It's pretty generic and that's the hard
15 part of using surveys, matching your job to the
16 survey. No survey will have data that's exactly
17 specific to your kind of job code system. We have
18 to say, okay, if this company provides this survey
19 data for this job function, which of our jobs apply
20 to that. So it's pretty generic what you get from
21 these companies.
22 CONT'D EXAMINATION BY PAMELA MAHON, ESQ.
23 Q. With regard to compensation, is
24 compensation included in this survey date that you
25 describe d?

Page 30
1 Steve Goodman
2 A. Yes.
3 Q. In terms of compensation what level of
4 details is provided in these surveys?
5 A. Usually, in surveys, again, I'm seeing
6 it after the survey, so, at some point a
7 compensation expert will do a much better job of
8 explaining the output that's coming from the
9 consulting company. By the time I look at it,
10 generally what I am looking at is what is the
11 median pay for a set of jobs. What is the 25%
12 percentile and the 75th percentile. Those sorts of
13 aspects.
14 Q. Have you ever received in it's original
15 form or based on the summary or analysis by
16 compensation experts at Bank of America, have you
17 ever received a survey data?
18 A. I have reviewed survey data after it's
19 been boiled down to put into my terms. I remember
20 once someone tried to show me something they got
21 from a consulting firm and because I'm not an
22 expert in statistics and regressions, it was too
23 much for me. In all honesty, it always has to be
24 boiled down into something that's usable.
25 Q. Who does the boiling down?

Page 66
1 Steve Goodman
2 policies?
3 A. In a general level that there are too
4 many policies to remember them all. Certainly I
5 refer to experts if I want to specificity around a
6 policy.
7 Q. For example, this is a hypothetical, you
8 were considering terminating someone's employment
9 and you wanted to look up a specific provision, how
10 would you go about doing that?
11 A. I would call one of the centers of
12 expertise which specialize in employee relations
13 type of issues and I seek advise from that area.
14 Q. Do you know if Bank of America has a
15 policy that requires it's employees to keep it's
16 compensation confidential?
17 A. I can't site the specific policy. I
18 would say that customer information and associate
19 information are considered sacred, literally.
20 There's significant instruction around both
21 customer and associate data privacy.
22 Q. What is that significant information?
23 A. That it can not be shared.
24 Q. What documents are you referring to?
25 MR.CHEN: You mean what kind

Page 67
1 Steve Goodman
2 information is kept confidential or what
3 document is the policy contained in?
4 Q. Both, well, my understanding from your
5 testimony is that associate information is sacred
6 as you said and I'm asking you were where in the
7 Bank of America policy is that a policy?
8 A. It's laid out and there are compliance
9 training that we are required to take periodically
10 and as part of that compliance training there are
11 specific instructions around not providing
12 confidential data of any sort, customer or
13 associate.
14 Q. The compliance training centers around
15 Bank of America policies, is that fair to say, you
16 are not going to have compliance training for not a
17 non-enforceable event. Is there somewhere where it
18 specifically states that employee information
19 relating to compensation has to be confidential?
20 A. I'm confident it's somewhere. I can't
21 tell you exactly where.
22 CONT'D EXAMINATION BY PAMELA MAHON, ESQ.
23 Q. The compliance training that you just
24 referred to, that's training for Bank of America
25 employees to not divulge another employees

Page 69
1 Steve Goodman
2 CONT'D EXAMINATION BY VICKI ANDREADIS, ESQ.
3 Q. Do you know if Bank of America requires
4 it's employees to sign A confidentiality agreement
5 or any type of agreement with respect to keeping
6 their own compensation information confidential?
7 A. I don't recall.
8 Q. Have you ever instructed anyone at Bank
9 of America to keep their compensation information
10 confidential?
11 A. In 23 years?
12 Q. Sure?
13 A. I don't recall that I ever specifically
14 told an individual they could not share their own
15 information with someone else.
16 Q. Do you know if Bank of America has ever
17 terminated anyone for disclosing their own
18 confidential compensation information?
19 A. I don't know the answer to that.
20 Q. Have you ever had to terminate someone
21 on that basis for disclosing their own?
22 A. I never terminated anybody for that
23 reason, personally.
24 MS. MAHON: In terms of not being
25 aware someone has been terminated for

Page 70
1 Steve Goodman
2 revealing their own compensation
3 information, have you been made aware that
4 anybody has been terminated for that reason?
5 A. No. No one made me aware of that.
6 Q. Mr. Goodman, do you participate in
7 recruiting people, HR executives?
8 A. Yes.
9 Q. Tell us a little bit about that process,
10 what goes into the recruitment process?
11 A. A lot. First we identify what our need
12 is and we identify what skills and capabilities we
13 are looking for and then we will generally look
14 internally first to see if there is anyone capable
15 of moving. If not, we go externally in the market
16 to fill those roles.
17 Q. Let's talk about going externally, how
18 is that search done?
19 A. Many different ways. Sometimes we do
20 searches through the Internet using various web
21 sites where people put resumes on the Internet.
22 Sometimes we will do different advertisements into
23 trade publications and we do a lot of networking
24 and talk to people who know people in various
25 companies and know people highly thought of and we

Page 87
1 Steve Goodman
2 Q. Have you ever had an employee advice you
3 that the reason they are leaving is to go make more
4 money somewhere else?
5 A. Yes.
6 Q. Have you asked that employee how much
7 money they are going to be making at other
8 companies or firms?
9 A. I don't recall asking that question.
10 Q. Have you ever had a discussion about the
11 compensation in hopes to perhaps match that
12 compensation?
13 A. Going through 23 years here. I don't
14 recall a specific conversation one way or the
15 other. I don't recall a specific conversation.
16 Q. Do you recall any conversation when an
17 employee told you they were leaving to make more
18 money someplace else?
19 A. I don't recall a specific conversation
20 but if I'm sure there was some dialogue after that.
21 Q. I will give you a hypothetical, tomorrow
22 you are conducting an exit interview for an
23 employee that has just resigned, during that
24 interview the employee tells you I'm leaving to go
25 to firm X to make more money, would you feel

Page 88
1 Steve Goodman
2 comfortable during that discussion to ask the
3 employee what are you going to be making at firm X
4 or perhaps you want to see if you can match that
5 compensation and that is an employee you wanted to
6 keep?
7 A. Asking me my particular practice for
8 that I would generally not ask that question.
9 Q. Why would that be?
10 A. People generally stay at companies where
11 they feel they can get the greatest amount of
12 growth and development in their career. If
13 somebody chooses to leave a company at that time
14 I'm assuming they believe they can have a better
15 career somewhere else.
16 Q. Your hesitation to ask such a question
17 is not based on Bank of America's policy that you
18 are not permitted to ask but it's your own personal
19 belief as to reason this person is leaving?
20 A. I had not thought of it in terms of a
21 policy.
22 Q. Have you ever been advised you can't ask
23 an employee during an exit interview or discussion?
24 A. No.
25 MS. ANDREADIS: Mr. Goodman thank you

Exhibit X
---------------------------------------------------
---------------------------------------------------
NEIL COTTY, taken
at the State of New York, Office of the Attorney
March 4, 2009 at 5:00 p.m., before SARA FREUND, a
Shorthand Reporter and a Notary Public of the State
of New York.
Page 122
1 N. Cotty
2 get." That's it.
3 Q. And did she have any further response?
4 A. Other than that's the decision that was
5 made by Merrill Lynch.
6 Q. What's the implication about the fact
7 that they're going to get paid?
8 A. Bank of America awards bonuses in
9 January, and, therefore, you get people working 150
10 percent during the holiday season when a lot of
11 people want to go skiing and take off. So if the
12 bonuses in the envelope was in hand, a lot of them
13 might have said, Jeez, I don't need this stuff any
14 wore. I'm out of here. So they were awarded their
15 bonus when I needed them at the most critical time.
16 So I was outraged.
17 Q. Did you talk to anyone at Bank of
18 America about your outrage?
19 A. I might have mentioned it to Bob Qutob,
20 who was on the transition team, to know what he
21 heard, and he confirmed it. Did I talk to Joe
22 about it? No.
23 Q. Did you express your concern about this
24 to anyone?
25 A. Bob, Wendy. That's it. No one else


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Exhibit C

IN RE: EXECUTIVE COMPENSATION INVESTIGATION

BANK OF AMERICA - MERRILL LYNCH

EXAMINATION of JOHN ALEXANDER THAIN,

taken at the Office of the New York State Attorney

General, 120 Broadway, New York, New York, on

February 19, 2009 at 10:10 a.m., pursuant to a

Subpoena, before SARA FREUND, a Shorthand Reporter

and a Notary Public of the State of New York.

2 billion and $25 billion. The structures that we're

3 being talked about in terms of the potential rescue

4 of Lehman posed significant difficulties, and we

5 were aware that Lehman was talking to at least two

6 potential acquirers, Bank of America and Barclays.

7 Mid-morning on Saturday, I became very

8 concerned that the combination of the potential

9 loss in the commercial mortgage portfolio, and the

10 complications of putting any type of rescue

11 together without any form of government assistance

12 made it likely that Lehman would not, in fact, be

13 rescued; that it would fail. And I was very

14 concerned about the impact a Lehman failure would

15 have on the market generally upon all the financial

16 institutions, but, in particular, on Merrill Lynch.

17 Q. That would be a good place just to ask

18 you to focus a little more on what occurred on

19 Saturday morning that heightened your concern then

20 that led you to think that Lehman might fail.

21 A. It was a combination of the fact that

22 the size of the loss was of a magnitude that it was

23 going to be difficult to put together a rescue

24 package, and the structures that could possibly do

25 that were very difficult to put together with that

U.S. LEGAL SUPPORT, INC.

2 group. If you go back to long-term capital -- and

3 I was part of the group that put that rescue

4 package together -- that was $4 billion, and that

5 was difficult enough. The idea of putting

6 together, whether it's $15 billion or $25 billion,

7 and making that actually happen in a relatively

8 short period of time, it was my personal assessment

9 that that was very unlikely. And the combination

10 of Tim Geithner, Hank Paulson and Chris Cox,

11 continued to maintain that the government was not

12 going to provide any form of assistance, so I felt

13 that I needed to give Merrill Lynch alternatives in

14 the event of a Lehman bankruptcy. So mid-morning I

15 placed a phone call to Ken Lewis saying that we

16 would like to engage in a conversation about a

17 strategic transaction, and he said "Fine" -- he

18 was, I believe, at his home in Charlotte -- and he

19 said, "I can be there mid-afternoon," and we agreed

20 to meet at 2:30 on Saturday afternoon at their

21 corporate apartment in Time Warner.

22 Q. Before we go into the conversation with

23 Mr. Lewis, could you just go through a little bit

24 on what your thinking was, at the time, about the

25 impact a Lehman failure would have on Merrill?

U.S. LEGAL SUPPORT, INC.

2 A. It's always a little bit difficult to

3 remember exactly what your thinking was on a

4 particular day because many things had transpired

5 since then, and, of course, I now know what the

6 real impact was of the Lehman failure, but my best