Published January 14, 2015
The New York attorney general's office has subpoenaed Bank of America Corp. seeking the names of Merrill Lynch executives who received $3.6 billion in year-end bonuses, after Chief Executive Ken Lewis failed to provide those details during a lengthy deposition Thursday evening.
Lewis, who traveled to New York on the company's corporate jet, said that he ``answered the questions that were asked to the best of my knowledge.''
Lewis' deposition was part of an ongoing investigation by New York Attorney General Andrew Cuomo into the timing of Merrill Lynch's bonuses and whether proper disclosure was made to shareholders about the size of the bonuses. They were granted just before Bank of America's acquisition of Merrill closed, and as that bank was seeking additional government aid on top of $25 billion it had already received.
Lewis' use of the company aircraft seemed surprising since it comes at a time when bailed-out banks have faced heavy scrutiny over executives' use of such perks.
``Because of the timing of this meeting, we felt it was necessary to use corporate aircraft,'' said company spokesman Timothy Gilles.
Attorney General Andrew Cuomo is ``disappointed and frustrated'' that Lewis has not cooperated in providing the information, said special assistant Ben Lawsky following the meeting, but he stopped short of saying the discussions had been contentious.
Bank of America spokesman Robert Stickler said the bank for the past two weeks has offered to provide the attorney general's office with employees' names if Cuomo would guarantee their confidentiality, but he has declined to do so.
``We believe our employees are entitled to confidentiality in terms of their compensation,'' Stickler said. He also said publicizing individuals' compensation puts the bank at a competitive disadvantage, because other firms could then try to lure employees away with better offers.
``I'm tired. It's been a long day,'' said a stoic Lewis standing outside the attorney general's office in lower Manhattan late Thursday after four hours of testimony.
Just days earlier, former Merrill Lynch CEO John Thain testified for the second time in less than a week about the bonuses. Bank of America's chief administrative officer, J. Steele Alphin, was also subpoenaed to testify.
Thain, who left his position as head of the wealth management unit of the newly combined company last month, was recalled to Cuomo's office after he refused last week to provide details about individual bonuses. A court order issued Monday forced Thain to return and supply those details.
``We think it's vital to know who got them,'' Lawsky said of the bonuses.
North Carolina's Attorney General Roy Cooper also has made a request for documents from Bank of America about the bonuses. The state's Department of Justice earlier this month issued an ``investigative demand'' seeking records, including a list of Merrill employees who received bonuses. Bank of America is required to respond by March 4, according to the 11-page demand.
Cuomo has been investigating $3.6 billion in bonuses Merrill Lynch executives received less than a month before the company completed its sale to Charlotte, N.C.-based Bank of America, and whether investors were properly informed about Merrill's finances. The payments came as New York-based Merrill was on the brink of reporting a more than $15 billion fourth-quarter loss and more than $27 billion in losses for the full year.
Bank of America has repeatedly said Merrill Lynch was an independent company last year, and its board of directors had ultimate approval over how much to pay employees. Lawsky declined to comment on whether Lewis had the authority to stop the bonuses from being issued.
But the bonuses apparently were a point of contention for Bank of America. The initial reports of the bonuses came just days after Bank of America received an additional $20 billion from the government that it said it needed to help offset the losses it was absorbing from the Merrill acquisition. The additional support was provided to Bank of America as Lewis showed trepidation about completing the deal to acquire Merrill.
Only hours after news broke about the bonuses, Thain agreed to resign from his new post as head of wealth management at the combined bank.
The government helped orchestrate the acquisition of Merrill by Bank of America over the same weekend in September that another investment bank, Lehman Brothers, went under, setting off the most intense period of the financial crisis.