New York Attorney General Blasts Merrill Executives on Bonus Plan

February 11, 2009 - 11:44 AM
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New York (AP) - New York Attorney General Andrew Cuomo laid out further details Wednesday about $3.6 billion in bonuses Merrill Lynch & Co. executives received, calling the investment bank's executives irresponsible.
 
Cuomo detailed the size and scope of the bonuses in a letter sent Wednesday to U.S. House Financial Services Chairman Barney Frank.
 
"In a surprising fit of corporate irresponsibility, it appears that, instead of disclosing their bonus plans in a transparent way as requested by my office, Merrill Lynch secretly moved up the planned date to allocate bonuses and then richly rewarded their failed executives," Cuomo stated. In the letter, Cuomo said he requested information on Merrill's expected bonuses as early as Oct. 29, but never received any details about the size of the bonus pool and criteria it planned to use to make the payments.
 
The Merrill bonuses were paid in late December, just days before Bank of America Corp. completed its purchase of New York-based Merrill.
 
Last month, when news of the bonuses broke, former Merrill Chief Executive John Thain resigned from his new post as head of the wealth management division of the combined bank.
 
Cuomo has already subpoenaed Thain and Bank of America's chief administrative officer, J. Steele Alphin, as he investigates the timing of the bonuses. Cuomo is likely to seek testimony from other executives at the banks, according to the letter.
 
North Carolina's Attorney General Roy Cooper also made a request for documents from Bank of America about the bonuses.
 
The initial reports of the bonuses came just days after Charlotte, N.C.-based Bank of America received an additional $20 billion from the government that it said it needed to help offset the losses it was absorbing from the Merrill acquisition. The government also promised to cover losses on more than $100 billion in risky assets.
 
Bank of America's Chief Executive Ken Lewis is scheduled to testify Wednesday along with other banking executives whose firms have received government funds.
 
Cuomo said in the letter that Bank of America, whose deal to acquire Merrill closed Jan. 1, was apparently complicit in the move to award bonuses before Merrill's fourth quarter earnings were announced.
 
Bank of America spokesman Scott Silvestri said in a statement that Merrill Lynch was an independent company last year, and its board of directors had ultimate approval over how much to pay employees.
 
Silvestri said: "Bank of America did urge the bonuses be reduced, including those at the high end. Although we had a right of consultation, it was their ultimate decision to make. In addition, a substantial amount of the Merrill bonuses were contractually guaranteed."
 
Bank of America on the other hand, severely slashed its 2008 year-end bonuses. Bank of America's top executives received no incentive compensation in 2008, and the next level of executives bonus pool was reduced by 80 percent, Silvestri said.
 
Thain did not take home a 2008 bonus, nor did four other top executives at Merrill: its president and chief operating officer, its president of global wealth management, its chief financial officer and its general counsel.
 
Cuomo said four executives at Merrill alone received bonuses totaling $121 million. Nearly 700 employees received a bonus of at least $1 million. The letter did not disclose names of the bonus recipients.
 
The North Carolina Department of Justice last week issued an "investigative demand" seeking records, including a list of Merrill employees who received bonuses. Bank of America is required to respond by March 4, according to the 11-page demand.
 
The payouts came as Merrill was also on the brink of reporting a more than $15 billion fourth-quarter loss as it has been among the hardest hit by the ongoing credit crisis.
 
The government helped orchestrate the acquisition of Merrill by Bank of America over the same weekend in September that another investment bank, Lehman Brothers, went under, setting off the most intense period of the financial crisis.
 
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AP Business Writer Ieva M. Augstums reported from Charlotte, N.C. AP Writer Michael Gormley from Albany, N.Y. contributed to this report.