Welfare for the Rich: Bank of America interferes with probe of Merrill Lynch CEO bonuses

Merrill Probe Stymied by Bank of America, New York’s Cuomo Says
By David Mildenberg and Karen Freifeld
March 7, 2009
Bloomberg

Bank of America Corp. is still interfering in his investigation into bonuses given to Merrill Lynch & Co. employees, New York Attorney General Andrew Cuomo told a New York Supreme Court judge.

“We respectfully request that the court reject Bank of America’s continued efforts to stymie the attorney general’s investigation,” Cuomo said in his letter yesterday.

Cuomo is probing a decision by Merrill, which lost $15.8 billion in the fourth quarter, to award $3.6 billion in bonuses in late December, days before Bank of America bought the firm on Jan. 1. Former Merrill Chief Executive Officer John Thain and Bank of America CEO Kenneth Lewis have already testified to Cuomo, and Cuomo has subpoenaed seven of the bonus recipients, a person familiar with the matter said.

Bank of America, the largest U.S. bank by assets, said it offered information on individual Merrill bonuses that Cuomo is seeking. Bank of America won’t comply with Cuomo’s request, even under an agreement to keep it confidential at least temporarily, according to Cuomo.

“Bank of America does not believe the attorney general needs the freedom to place private, personal information in the news media in order to conduct his investigation,” Scott Silvestri, a spokesman for the Charlotte, North Carolina-based bank, said in an e-mail.

Trading ‘Irregularity’ Found

The dispute with Cuomo widened as Merrill said it uncovered an “irregularity” during a review of its trading operations in London. The New York Times said risk officers discovered three weeks ago that a London currency trader who had recorded a trading profit of $120 million for the fourth quarter may instead have lost a large amount.

The newspaper identified the trader as Alexis Stenfors, 38, and said he described the matter as a “misunderstanding.” Calls from Bloomberg News to his office in London and a mobile phone weren’t answered.

Stenfors previously worked at Calyon, the investment-banking unit of France’s Credit Agricole SA, according to the U.K. Financial Services Authority’s register. He joined Merrill Lynch in 2005, and is listed as being “inactive” since Feb. 25. A spokeswoman for Calyon couldn’t immediately comment.

In the Cuomo probe, Bank of America is seeking to expand a temporary confidentiality order on Thain’s testimony to include all witnesses in the investigation, including Greg Fleming, Merrill’s former head of investment banking, Cuomo said. Fleming, who left the bank in early January to take a post at Yale University, testified this week, the attorney general said in the letter.

Not ‘Commercial Litigation’

“Bank of America is treating this matter as a commercial litigation between private parties. It is not,” Cuomo said. “Bank of America is seeking to prevent witnesses from testifying and is seeking to require advance notice of the attorney general’s investigative steps, which it is not entitled to do.”

The Wall Street Journal on Wednesday published the names of a number of the top executives and their 2008 earnings, citing documents and people familiar with Merrill’s compensation. Eleven top executives were paid more than $10 million in cash and stock last year, the Journal said. The newspaper identified the seven bonus recipients as Andrea Orcel, David Sobotka, Peter Kraus, Thomas Montag, David Gu, David Goodman and Fares Noujaim.

A person familiar with Cuomo’s investigation said that seven bonus recipients were subpoenaed in connection with the probe. The person identified the people as Orcel, Sobotka, Kraus, Montag, Gu, Goodman and Noujaim.

‘Road Map’

The information Cuomo seeks would provide a “road map” showing which business lines Bank of America considers most valuable and to assist rivals seeking to poach talented staff, the bank said in its court filings.

Cuomo’s letter said House Financial Services Committee Chairman Barney Frank will soon demand Bank of America make individual bonus information public. The bank has received $45 billion from the Treasury’s bank recapitalization program.

Cuomo said in a Feb. 10 letter that Merrill “secretly and prematurely” awarded the bonuses with Bank of America’s “apparent complicity.” After the top four recipients received a total of $121 million, the next four received a combined $62 million and the next six a combined $66 million, Cuomo said.