Nearly 700 Merrill Lynch executives had cash bonuses of more than $1m each for last year, New York’s top law enforcement official disclosed on Wednesday.
Andrew Cuomo, New York’s attorney-general, called the bank’s decision to bring forward nearly $4bn of pay-outs a “surprising fit of corporate irresponsibility” that raised “serious and disturbing questions”.
Mr Cuomo said the bonuses for 2008 were “disproportionately distributed to a small number of individuals”, with the top four recipients taking in a combined $121m.
Mr Cuomo launched an investigation into the payments at Merrill Lynch after the Financial Times reported last month that Merrill accelerated its bonus payment schedule in December, even as its losses were approaching record levels. He detailed some of the investigation’s findings on Wednesday in a letter to the House financial services committee.
Mr Cuomo’s letter was made public as top US financial chiefs were grilled before the House committee in televised hearings. Ken Lewis, chief executive of Bank of America, which bought Merrill, was criticised in the hearings for Merrill’s bonuses. He said his involvement in the matter was “very limited”. “We urged the ML executives to reduce the bonuses substantially,” he said.
In spite of operating losses of $41.2bn for 2008, close to 700 Merrill executives received cash bonuses of more than $1m for the year, Mr Cuomo wrote.
John Thain, former Merrill chief executive, and his management team paid the bonuses in late December, bringing forward the payments by a full month, just days before Bank of America completed its acquisition of Merrill. Neither he nor his inner circle received bonuses.
After the $121m paid to the top four, the next 10 recipients took home $128m in incentive pay, while the top 149 bonus recipients got a total of $858m. The fact that Merrill paid out billions in bonuses at a time when Mr Lewis was asking for $20bn in government funds to complete the acquisition has generated outrage over the alleged use of bank rescue funds to reward Wall Street executives.
In all, Mr Cuomo determined that 696 employees of Merrill Lynch received a bonus of at least $1m for the year.
When the FT disclosed details of the payments last month, BofA issued a statement blaming the bonuses on Mr Thain. Since then, the bank has backtracked by acknowledging some involvement in the process.
The FT has reported that BofA’s chief administrative officer, Steele Alphin, as well as its main liaison to Merrill, Andrea Smith, were involved in the bonus payment process.
Mr Cuomo has issued subpoenas to Mr Thain – who was dismissed by B of A last month – and Mr Alphin, calling on both men to testify. Financial Times