Bank of America: new scandal with Merill Lynch

According to The Associated Press, New York Attorney General Andrew Cuomo made the claims in a letter sent Wednesday to U.S. House Financial Services Chairman Barney Frank as he accuses executives at Merrill Lynch & Co. Inc. of prematurely awarding $3.6 billion in bonuses late last year, just days before Merrill was taken over by Bank of America Corp.

Charlotte-based Bank of America paid $29.1 billion, including $8.6 billion in preferred stock, for on January, 1. BofA, as part of the deal, received $20 billion in federal bailout funds to buy the troubled brokerage firm, which lost $15.3 billion in the fourth quarter.

We would remind that BofA initially received $25 billion under the Troubled Asset Relief Program before getting the additional $20 billion as part of its acquisition of Merrill. The federal program seeks to unfreeze the credit markets and boost the economy.
According to the Cuomo’s words, Merrill Lynch secretly moved up the planned date to allocate bonuses and then richly rewarded their failed executives. He considers that BofA was aware of the decision to award bonuses before Merrill’s fourth-quarter earnings were announced. BofA spokesman Scott Silvestri told The AP that Merrill was an independent company when its compensation committee approved the bonuses.

The subpoenas issued by Cuomo late last month seeking the testimony of former Merrill Chief Executive John Thain, as well as the testimony of BofA Chief Administrative Officer J. Steele Alphin were the part of an ongoing inquiry into the bonuses paid by Merrill late last year.

The fact that Merrill appears to have moved up the timetable to pay bonuses before its merger with Bank of America is troubling to say the least and warrants further investigation. So The N.C. Department of Justice also has requested documents from BofA regarding bonuses Merrill paid to its employees.