New York Attorney General Andrew Cuomo wrote a letter yesterday to Rep. Barney Frank (D-Mass.), head of the House Financial Services Committee, (which is currently holding hearings Washington on how banks are spending bailout funds.) In the letter, Cuomo expresses concern that Merrill Lynch moved up their bonus schedule so that they could make sure that taxpayers would get the bill.
As you probably know, Merrill Lynch posted a $15.31 billion loss in the 4th quarter, which forced taxpayers to help Bank of America acquire the firm.
One disturbing question that must be answered is whether Merrill Lynch and Bank of America timed the bonuses in such a way as to force taxpayers to pay for them through the deal funding. We plan to require top officials at both Merrill Lynch and Bank of America to answer this question and to provide justifications for the massive bonuses they paid ahead of their massive losses. As you know, my Office recently issued subpoenas seeking the testimony of former Merrill Lynch CEO John Thain, as well as the testimony of Bank of America Chief Administrative Officer J. Steele Alphin. I expect we will also be seeking the testimony of other top executives at these firms.
In addition, the AG goes on to bust the myth that Merrill’s hefty bonuses were spread out among a wide swath of employees, and were therefor actually quite modest. It turns out that while they did pay bonuses to some 39,000 employees, Merrill made 700 employees millionaires overnight. Cuomo says, “the vast majority of these funds were disproportionately distributed to a small number of individuals.”
Bearing in mind that Merrill moved up its bonus payments in advance of its announced $15 billion quarterly loss and $27 billion annual loss, we have determined that Merrill Lynch made the following bonus payments:
- The top four bonus recipients received a combined $121 million;
- The next four bonus recipients received a combined $62 million;
- The next six bonus recipients received a combined $66 million;
- Fourteen individuals received bonuses of $1 0 million or more and combined they received more than $250 million;
- 20 individuals received bonuses of $8 million or more;
- 53 individuals received bonuses of $5 million or more;
- 149 individuals received bonuses of $3 million or more;
- Overall, the top 149 bonus recipients received a combined $858 million;
- 696 individuals received bonuses of $1 million or more.
Again, these payments and their curious timing raise serious questions as to whether the Merrill Lynch and Bank of America Boards of Directors were derelict in their duties and violated their fiduciary obligations.
You can read the full letter here. (PDF)