February 12, 2009 2:00 am

Cuomo outlines objections to Merrill bonuses

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Merrill Lynch's decision to bring forward its payment of $3.6bn in bonuses for 2008 was a "surprising fit of corporate irresponsibility" and raises "serious and disturbing questions", New York's top law enforcement official charged yesterday.

Andrew Cuomo, New York attorney-general, also said the bonuses 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 yesterday in a letter to the US House financial services committee.

Mr Cuomo's letter was made public as top US financial chiefs were grilled before the committee in televised hearings.

Ken Lewis, chief executive of Bank of America, which bought Merrill Lynch, was criticised in the hearings for Merrill's bonuses.

Mr Lewis said his involvement in the matter was "very limited". He said: "We urged the ML executives to reduce the bonuses substantially."

Despite operating losses of $41.2bn for 2008, close to 700 Merrill Lynch executives received cash bonuses of more than $1m each for the year, Mr Cuomo wrote.

Mr Thain and his management team paid out the $121m in bonuses in late December, days before Bank of America completed its acquisition of Merrill Lynch.

The next 10 bonus recipients took home $128m in incentive pay, while the top 149 recipients got $858m in aggregate payments.

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 bail-out money to reward Wall Street bankers.

"What my office has learned thus far concerning the allocation of the nearly $4bn in Merrill Lynch bonuses is nothing short of staggering," Mr Cuomo wrote.

When the FT disclosed the bonus payment last month, BofA issued a statement blaming the payments squarely on Mr Thain. Since then, the bank has backtracked by acknowledging some involvement in the process.

The FT has reported that Steele Alphin, BofA's chief administrative officer, as well as its key liaison to Merrill, Andrea Smith, were actively involved in the bonus payment process.

Mr Cuomo has issued subpoenas to Mr Thain - dismissed by BofA last month - and Mr Alphin, calling on both to testify.

"My investigation into whether these bonus payments violated New York's fraudulent conveyance statute and whether the lack of disclosures concerning these payments and other matters violated the Martin Act will continue", Mr Cuomo wrote.

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