Merrill bonuses made 696 millionaires: probe
Merrill Lynch quietly paid out at least one million dollars bonus each to about 700 top executive even when the investment house was bleeding with losses last year, a probe has revealed.
They were part of 3.6 billion dollars in the firm's bonus payments in December before the announcement of its fourth quarterly losses and takeover by Bank of America, the investigation by the New York state Attorney General's office showed.
"696 individuals received bonuses of one million dollars or more," New York Attorney General Andrew Cuomo said of the Merrill scandal in a letter to a lawmaker heading the House of Representatives financial services committee.
Cuomo said "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," according to a copy of the letter.
Bank of America said recently it was aware of the amounts and timing of the bonuses even though previous reports had suggested the top bank was surprised by the payout.
Cuomo said in his letter to Democratic lawmaker Barney Frank that his office was also examining whether senior officials at both companies "violated their own fiduciary obligations to shareholders.
"If they did, this raises additional serious issues with regard to the inappropriate use of taxpayer funds," he said.
"Merrill Lynch's decision to secretly and prematurely award approximately 3.6 billion dollars in bonuses, and Bank of America's apparent complicity in it, raise serious and disturbing questions," he said.
Shareholders and experts had expressed concern over Merrill's 15.3 billion fourth-quarter loss, which caused Bank of America to request a second round of government bailout on January 16.
Bank of America's shareholders voted to approve Merrill's takeover on December 5.
Former Merrill Lynch chief executive John Thain, Bank of America chief administrative officer J. Steele Alphin and other top executives have been summoned to provide testimony in the probe.
"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," Cuomo said.
Cuomo said the Merrill Lynch bonus payment was "nothing short of staggering."
While more than 39,000 Merrill employees received bonuses from the pool, the vast majority of these funds were "disproportionately distributed to a small number of individuals."
"Indeed, Merrill chose to make millionaires out of a select group of 700 employees."