Merrill docked for wrongly enriching executives

12 February 2009

New York's crusading Attorney-General Andrew Cuomo is back to what he does best - investigating corporate mismanagement, and this time it's Merrill Lynch that's in his sights. Now, he is accusing executives at the New York brokerage of prematurely awarding $3.6 billion in bonuses late last year, just days before Merrill was taken over by Bank of America Corp.

In a letter addressed to Congressman Barney Frank, Cuomo has charged the brokerage house of giving $1 million to each of nearly 700 employees even as it went under. Cuomo's letter comes as Frank's House of Representatives Financial Services Committee gets set to grill executives from eight banks that received $125 billion from the Treasury last fall.

Merrill executives have drawn fire because they paid 2008 performance bonuses in December, earlier than usual and despite the fact that Merrill had losses of $15.3 billion in the fourth quarter. Bank of America initially received $25 billion from the Treasury and later was forced to seek $20 million more, plus $188 billion in asset guarantees.

Cuomo, who began questioning Wall Street banks about their 2008 bonus plans in October, said in the letter to Frank that Merrill may have taken steps to pay lavish bonuses so that taxpayers would foot the bill. Cuomo has been examining whether Merrill broke securities laws when it paid the bonuses.

''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 in the letter.

''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 wrote.