Bank of America Says Bonus Disclosure Will Harm It (Update1)
By Karen Freifeld
March 5 (Bloomberg) -- Bank of America Corp. will suffer “grave and irreparable harm” if Merrill Lynch & Co. employees paid $3.6 billion in bonuses just before the firm’s acquisition by the bank are publicly identified, its lawyers said.
Bank of America today filed documents in state court in Manhattan to intervene in a case brought by New York Attorney General Andrew Cuomo to compel former Merrill Chief Executive Officer John Thain to testify about the bonus recipients.
“Neither the individual names nor the job titles bear any reasonable or relevant relationship” to Cuomo’s investigation, the firms argued in the documents. “Nor is there a reasonable or relevant reason to disclose such information to the general public.”
The information Cuomo seeks would provide a “road map” revealing which business lines the banks believe to be most valuable and enable competitors to poach the bank’s top talent, Bank of America argued in the court filing. Disclosure of the information would also cause “internal dissension and consternation,” pose security risks for the exposed bankers and their families, and cause employees to leave, according to the filings.
Yesterday, Cuomo subpoenaed seven people who received bonuses at Merrill Lynch & Co., said a person familiar with the matter. Thain and Bank of America CEO Kenneth D. Lewis previously testified in Cuomo’s office about the bonuses awarded before the Jan. 1 merger.
Seven Subpoenaed
The seven executives will be asked questions about their individual bonuses, their communications with Thain and the timing of the bonuses, the person said. The person identified the seven bonus recipients subpoenaed as Andrea Orcel, David Sobotka, Peter Kraus, Thomas Montag, David Gu, David Goodman and Fares Noujaim.
Scott Silvestri, a Bank of America spokesman, declined to comment yesterday. He said the bank doesn’t comment on subpoenas.
A Cuomo spokesman didn’t immediately return a call seeking comment on the bank’s filings today. The attorney general’s written response is due March 11. A court hearing is scheduled for March 13.
The Wall Street Journal yesterday 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.
Thain’s Testimony
Thain told Cuomo’s office in a deposition Feb. 19 that he couldn’t identify the bonus recipients, citing confidentiality orders from Bank of America. A New York judge ruled Feb. 23 Thain should complete his deposition and the testimony would be kept confidential until a court ruling.
Thain testified for a second time in Cuomo’s office on Feb. 24. “He cooperated thoroughly and answered whatever was asked,” his attorney, Andrew Levander, said in an e-mail that day. Levander declined to comment on whether Thain was asked to identify bonus recipients.
Lewis testified two days later. Benjamin Lawsky, a special assistant to Cuomo, said after Lewis left Feb. 26 that Cuomo served the bank with a subpoena to produce a list of the individual bonuses.
Cuomo Investigation
Cuomo has been examining whether Merrill broke securities laws when it paid the bonuses. He is cooperating with U.S. Special Inspector General Neil Barofsky in a federal probe of executive pay at banks that received money from the U.S. Treasury’s Troubled Asset Relief Program. Merrill and Charlotte, North Carolina-based Bank of America have received about $45 billion in TARP money.
Orcel, Merrill’s top investment banker, was paid $33.8 million in cash and stock, the Journal said, citing documents and interviews with people familiar with Merrill’s compensation.
Sobotka, who now heads global proprietary trading, was paid about $13 million in 2008, the Journal said. Gu, head of Merrill’s global-rates division, made $18.7 million last year, and Goodman, co-head of commodities, was paid $16.5 million, according to the Journal.
Kraus, who was head of global strategy at Merrill for only three months, had an employment contract estimated at $29.4 million, the Journal said. Kraus couldn’t be reached for comment by Bloomberg News through John Myers, a spokesman for AllianceBernstein Holding LP, where Kraus is now CEO.
Goodman, Gu, Noujaim and Orcel declined to comment through Timothy Cobb, a Merrill spokesman in London.
‘Secretly and Prematurely’
Cuomo said in a Feb. 10 letter that Merrill “secretly and prematurely’‘ awarded $3.6 billion in bonuses, with Bank of America’s ‘‘apparent complicity.’‘
Cuomo said in the letter that Merrill ‘‘chose to make millionaires out of a select group of 700 employees,’’ and that a smaller group was awarded ‘‘gigantic bonuses.’’
After the top four recipients received a total of $121 million, the next four received a combined $62 million, he said, and the next six a combined $66 million.
Overall, the top 149 people who got bonuses received a combined $858 million, according to Cuomo’s letter. He said 696 people got bonuses of $1 million or more.
The case is People v. Thain, 400381/2009, New York state Supreme Court (Manhattan).
To contact the reporter on this story: Karen Freifeld in New York at kfreifeld@bloomberg.net.
Last Updated: March 5, 2009 16:01 EST |
