No 2009 Salary Or Bonus For Ken Lewis, $1 Million To Be Clawed Back, Says Pay Czar

Tyler Durden's picture

Ken Lewis' problems continue. The WSJ reports that the outgoing BofA/ML CEO was just docked his entire 2009 pay and then some:

Kenneth Lewis, outgoing chief executive of Bank of America Corp.,
will get no salary or bonus for 2009, according to people familiar with
the matter, the biggest Wall Street name thus far to come under the
thumb of the government's pay czar.

In fact, Mr. Lewis will have to repay the North Carolina-based bank more than $1 million in salary he has already earned.

The move was demanded by Kenneth Feinberg, the U.S. Treasury
Department's special master for compensation, and was agreed to by Mr.
Lewis and the bank. Mr. Feinberg's rationale is based largely on the
fact that Mr. Lewis will leave the firm with a package of retirement
benefits and other stock awards worth between $69.3 million and $120
million, these people said.

Look for every bank still on the taxpayer dime to look to repay TARP tomorrow.

The move will stun Wall Street, which has been anxiously awaiting
Mr. Feinberg's rulings on compensation at seven firms receiving large
sums of government aid, including also Citigroup Inc. and General
Motors. Mr. Feinberg had been expected to clamp down on compensation by
cutting salaries for the most highly-paid employees at these firms. But
until now there's been little indication he would take away an
employee's entire pay.

For Mr. Lewis, the move bookends the rapid fall of an executive once
heralded as one of America's top bankers. Less than a year ago, he was
hailed for helping avert financial disaster by snapping up teetering
mortgage giant Countrywide and rescuing investment bank Merrill Lynch.
Mr. Lewis's fortunes soon turned as he was forced into the government's
arms to help his bank digest Merrill Lynch and eventually stripped of
his chairman title by angry bank shareholders.

While you may think Lewis' the retirement benefit package may be enough to last him until his quiet end somewhere far from the company he nearly destroyed in his over-zealousness to acquire Merrill, and remembered as one of Wall Street's worst CEO's, don't forget - he still has a very rough civil (and potentially criminal) trial coming up. Those can be quite costly, and also, in jail you can only smuggle so much cash (in your various bodily orifices).

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E Thomas St.'s picture

Can't BofA offer their lawyers on retainer to defend Lewis as a friendly gesture?

Arco's picture

Most employee agreements like Lewis' require that the company pay for his legal defense, provided that he is terminated based on certain things agreed to in that employee agreement. It'd be interesting to know if Lewis' scenario could be considered an instance where BofA would have to for his legal defense.

deadhead's picture

not an atty here, but i imagine it depends on the criminal side of the equation vs civil.

Howard_Beale's picture

I bet he goes the way of Ken Lay...spirit broken, time to check out.

chet's picture

Yaaaay, pay czar.  Of course, he's going to get $120 million in other benefits, but still, good show.


Next, that loudmouth AIG mofo.  Not only should he not receive a dime, he should be forced to shine the shoes of 100 taxpayers per day.  Or I should be allowed to punch him in the nuts every morning.  There are options.

Anonymous's picture

and while your punching, give a good stomp on LORD BLANKFEINS nuts over at government saks ...

.that Fstick has the gall to talk about - bringing pay "back in line"-- as he pockets taxpayer bonus blood-money, from the mother of all backstops.

who does he think he is fooling? --Hank Paulson ?

Problem Is's picture

He's already a numb nuts chet... but punch away. What great options (perks).

Hey, Jamie Dimon... I need a shine!

faustian bargain's picture

pay czar...we have sunk so far as a nation.

John Self's picture

Totally agree.  What a farce.  If I were Lewis, I would make a promissory note to a compelling charity for the amount the Czar is seeking + $1, with the condition precedent that the U.S. does not disgorge the money.  Then I'd fight the hell out of this thing, arguing all the way up through the courts that it's clearly not about the money, it's about what the government can and cannot do.

Anonymous's picture

You're right, but not in the way you think you are. It's pathetic that we have to have someone tell members of the financier class that they shouldn't take bonuses while their companies are circling the drain. If bankers won't self-regulate, someone's going to have to do it for them, and it so happens that the government is the only one big enough.

Fritz's picture

More headline grabbing bullshit - A token claw-back in an attempt to quiet the angry pitchfork crowd.

Anonymous's picture

Yeah. Even Zero Hedge is apparently fooled. This is a big fat nothingburger.

Wake me up when he has a fine that actually stings a little. This is idiot fodder.

Careless Whisper's picture

Looks like the battle lines are drawn. Welcome to the smack down. Kenny Boi vs. The Hammer. Seems like this is an attempt to discredit Lewis, not that we really need any more of that.

Anonymous's picture

so ... why no similar announcement about bernanke, geithner and paulson? surely the economic damage they've wrought is no less severe than what lewis did.

crzyhun's picture

Absolute power corrupts absolutely, whether in governement or in corporations.

Problem Is's picture

Or governments owned by corporations...

The 1st Tenet of Fascism.

Joeman34's picture

I'm a capitalist [read: hate any government intervention] but I have to admit, I think they got it right here.  Not one of these bank executives deserves the pay they are currently receiving.  We all know the background and reasons why.  I know it's a slippery slope, but I'm actually glad it's happening.  Am I crazy???

Cognitive Dissonance's picture

Sir, a modern capitalist loves government intervention when his back is to the wall and bailouts are plentiful, loves government when he can (using corporate funds) lobby for (and get) lower corporate and personal tax rates, loves government when he gets no-bid cost plus contracts and hates it when the rivers flow with honey and bonus season rolls around.

Get with the program.

BTW, to answer your question, Yes. :>)

chet's picture

You're not crazy.  Remember we own big chunks of these companies, and really should own much more since we're the reason they're even alive.

As a shareholder, I don't want the very executives who blew up these companies to be given lavish pay packages.  I want the people who blew up these companies to be fired, docked pay, and whatever else we can do.

Most of these men shouldn't even have jobs. They used their fancy Wharton degrees to turn functioning companies into non-going concerns.  Their failures were so complete that the government had to save them.

Those are failed businesspeople who shouldn't be drawing a salary anymore, because they shouldn't be employed.  Punish incompetence and failure - nothing more capitalist than that.

Careless Whisper's picture

The stockholders and the Board of Directors are the ones to do the punishing.

faustian bargain's picture

I do not want to own any chunks of these companies. I don't know anything about running a company like that, nor does the government. I want out, I don't want to be the one to do the punishing. Let the market punish them. They should have been allowed to fail. Better yet, the bubble economy should never have been created by the government in the first place.

chet's picture

I couldn't agree with you more.  I don't want to own them either.  And I wish they had failed.

But wishin' and hopin' don't make it so.

The fact is that we own them now, and as long as we have control over companies (whether we want it or not) we shouldn't reward failure.

faustian bargain's picture

I'm just afraid we're trying to make a right turn by taking two wrong ones.

chet's picture

I see where you're coming from. 

I just think that these "capitalists" should truly feel the pain of having to be bailed out by the taxpayer.  Instead, we get that arse CEO over at AIG openly insulting us.  They obviously don't feel any shame or humility for being on government life support.  If it takes a pay czar to make them feel that pain, so be it.  Frankly, I would prefer a couple guys with a length of pipe.

Bottom line, if you don't want government breathing down your neck, don't get your company to the point where you need to take billions of dollars from the government.

Gordon_Gekko's picture

I deeply suspect that Ken Lewis is being made the fall guy for this whole lurid affair when instead it is Hank Paulson and Ben Bernanke's salary and assets that must be recouped. I am not saying Lewis is blameless, but it is they who put a gun to his head. We know he was threatened with losing his job. I am more concerned with what we DON'T know. What else was he threatened with and is he being threatened even now to keep his mouth shut? I wouldn't put it beyond the banksters to do such a thing and eat their own when convenient - like they say - there is no honor among thieves. WHERE IS THE CLAWBACK FROM HANK PAULSON's BILLIONS?

Careless Whisper's picture

People on the Street are ruthless - ice in their veins. You are correct, what else is Lewis being threatened with? The bankstas own the joint.

"I need, Don Corleone, all of those politicians that you carry around in your pocket, like so many nickels and dimes." -- Sollozzo

Anonymous's picture

Apocalypse Now-

A wise man GG, divert attent
ion away from the true ilk and toward a non New York bank that dared to grow bigger than the club.

The fed has a rule similar to our own: The first rule of fed club is that you don't talk about fed club. Ken violated that rule while under oath as he mentioned that you "Don't go against the fed".

From now on, we should refer to the fed as K-fed.

faustian bargain's picture

Any charges based on decisions he made under duress from the government are morally bankrupt, in my opinion.

Not that he gets a pass, but public rage needs to be directed based on the full context.

Howard_Beale's picture

No one put a gun to his head to negotiate a ridiculous price with John Thain. He should have paid market price for Merrill Lynch when Thain knew he had no option. Lewis is an egomaniac that deserves everything he is getting. Countrywide--ignorant purchase.  Merrill, pure idiocy considering the potential toxic waste. Don't get me wrong GG, I agree that Hank and Ben are to blame for all of this and should be held accountable, but calling Lewis a fall guy is absurd. BAC was already a wasteland thanks to Ken's poor judgement. Merrill was just the topping on his bad Christmas fruitcake. Just check out how much fun M&A departments have had with BAC over the last several years:

Now tell me you could ever read their balance sheet and believe any of their accounting. Feels like Worldcom all over again.

deadhead's picture

fasb 166, 167 comes into play Q1 2010. the way it stands now, all the SIV shit that bac has (caymans is my best guess but location is irrelevant at this point in my view) is supposed to come back on the balance sheet.  i think most of it is like sub prime  cdo's and the like...i'm looking forward to seeing this one happen. 

anynonmous's picture

The editorial board has suggseted that GG prepare an article on this very topic for the "contributors" section of ZH before the "trial of the century" takes on a life of its own. 

AR's picture

GG / Regarding some of the posts above, Lewis' entire legal defense fees and expenses will be paid for by the bank, as he was acting in his duty and capacity as CEO by and through the bank's board (critics forget that all decisions regarding the MER acquisition were board approved, not Lewis'). We've heard that both Bernanke and Paulsen were intimately involved in directing many of the terms and conditions of the Merrill acquisition, including the year-end timing. The real question is, how far will Lewis go in "outing" them? Ken's major fault was failing to disclose the Merrill bonuses and losses prior to the shareholder vote on December 5th. This, he has told colleagues, was a terrible error in judgement. However, we have yet to hear if he was advised, or directed, to withhold such information from shareholders, from either the bank's attorneys, or, if the edict came from Bernanke or Paulsen themselves, in order to ensure the acquisiton closed by year-end. I suspect Cuomo will uncover these details in the coming months.  In all, Ken deeply regrets following this ill-advised advice. Lastly, we find it a bit amusing, that Lewis is being blamed directly, while everyone seems to forget that it was his Board of Directors that approved the deal, and they were intimately apprised, and aware, of all the details of the deal (most specifically, the MER bonuses and losses). There is a lot more of this story that has yet to come out.

Anonymous's picture

How about the rest of the crowd ?

Fuld, ex Mer CEO, Dimon, Paulson, Blankfein, Bear CEO, Mack,

and all the rest....

How about people within the SEC, Rating agencies, and the list goes on.

Enough of this public placebo bullshit.

How about some heads on poles, and their bankroles busted?

Give me a reason why this should not be the case.

Including Bush, Cheney, all of them.

The whole enchalada.

buzzsaw99's picture

Try him, hang him, convert his assets to cash and burn them. Repeat 100k times.

Louise1's picture

yes, but once the pay czar goes after Lewis, then he can go after anyone.  This is just the beginning. 



faustian bargain's picture

right...let's see him go after Paulson, Geithner, Bernanke...

Louise1's picture

but they won't go after those guys, they will want to control YOUR pay.

faustian bargain's picture

ah, my mistake...I thought you were lauding the czar.

Louise1's picture

no, bemoaning the beginning of the end

Marley's picture

Beginning of the end?  How about June 24,1985,"the first time America has slipped into the status of a net debtor since the early part of the century."

faustian bargain's picture

How about 1913 then. I bet we could go back even further.

Marley's picture

Aw, good one.  But to be fair we were a nascent economic power at that point in time.

faustian bargain's picture

Yeah, it's been a good ride. Maybe the 'end' is kinda relative...I mean it's not like time is going to stop or anyth

Anonymous's picture

BofA bought insurance to cover Lewis' legal bills... that's what normally happens... you didn't think he would pay for it did you?

waterdog's picture

The next penalty for him will be his prescription policy will no longer cover his Viagra.

It does no good to ask a man, who has major legal problems, for money back. I mean, really, claw this.

cthulhu's picture

Aren't pay arrangements regulated by state law? It would seem to me that standard contractual arrangements couldn't be overturned by a "pay czar" without some enabling legislation -- which I'm not sure exists.


Then again, "...was agreed to by Mr. Lewis and the bank." I wonder what the quo was for that quid.

faustian bargain's picture

I don't think this government is very much concerned about contractual arrangements.


[edit: ...which I believe is the main message to be taken from this whole 'pay czar' thing.]

perpetual-runner-up's picture

This is a practice known as "setting precident" choose a target the masses have emotional hatred for and set your precident of breaking contracts, and doing other things that are otherwise unthinkable, there...

For everyone that agrees with this, wait until it comes your way and the people doing say "we have precident in the Ken Lewis case that says we are allowed to do this...