Bank of America's chairman and CEO, Kenneth Lewis, has been issued a subpoena by New York State Attorney General Andrew Cuomo.
According to a _""CNN"":http://www.cnn.com/CRIME/_ report, Cuomo is investigating whether Bank of America, which ""completed its acquisition"":http://newsroom.bankofamerica.com/index.phpxs=press_releases&item=8327 of Merrill Lynch on January 1st, violated state law by withholding information from investors. According to Cuomo, the newly acquired Merrill Lynch paid out big bonuses to its executives before publicly reporting a $15.31 billion fourth quarter loss.
Cuomo wrote in a letter to Rep. Barney Frank (D-Massachusetts), chairman of the House Financial Services Committee, ""Merrill Lynch's decision to secretly and prematurely award approximately $3.6 billion in bonuses, and Bank of America's apparent complicity in it, raise serious and disturbing questions.""
All in all, 39,000 Merrill employees received bonuses last year, but Cuomo said the dissemination was unbalanced, with payments of at least $1 million each going to a choice 696 employees, a combined $121 million going to the top four chiefs, $62 million paid to the next four executives, and $66 million to the next six in line. Cuomo wrote to Frank, ""Indeed, Merrill chose to make millionaires out of a select group of 700 employees.""
According to Cuomo, Merrill Lynch clandestinely handed out these bonuses prior to the Bank of America acquisition ""instead of disclosing their bonus plans in a transparent way as requested by my office.""
Bank of America argues that Merrill Lynch was an independent company at the time the bonuses were doled out. A spokesperson from the bank told _CNN_, ""Bank of America did urge the bonuses be reduced, including those at the high end. Although we had a right of consultation, it was their ultimate decision to make.""
Once again the hot button of executive compensation on Wall Street has reared its ugly head. Bank of America has received $45 billion in aid from the federal government, in addition to a $20 billion investment to facilitate its acquisition of the faltering Merrill Lynch. _CNN _reported that Bank of America's spokesperson said its top executives were given no incentive compensation for 2008 and the next level of executives took an 80 percent reduction in bonus amounts.