Merrill Lynch & Co may have misled Congress in representing last November that it planned to pay out bonuses at year end, when in fact it decided to accelerate those payouts, New York Attorney General Andrew Cuomo said on Wednesday.
The attorney general also said Merrill traders may have delayed taking hefty losses late last year until after the company decided to pay out $3.62 billion of overall bonuses.
He also again rejected the attempt by Bank of America Corp
The allegations were made in filings with the New York State Supreme Court in Manhattan, two days before Justice Bernard Fried is expected to hold a hearing on whether Bank of America can keep the bonus data confidential.
Bank of America was not immediately available for comment, but has previously said it would suffer grave harm by revealing bonus data, citing concerns about competitors poaching staff and privacy.
Merrill had, in previous years, traditionally waited until after the new year to award bonuses. The attorney general is examining whether the bonuses violated securities laws, and whether Charlotte, North Carolina-based Bank of America should have disclosed more about Merrill's condition sooner.
MERRILL MISLEADING, CUOMO SAYS
In Wednesday's filing, Cuomo said Bank of America clearly could have influenced, if not controlled, the timing of the bonuses, but chose neither to request nor demand changes.
John Finnegan, a Merrill director and member of its compensation committee, said at a March 3 deposition I don't remember any resistance to a proposal by Chief Executive John Thain at a November 11 meeting to paying out bonuses before year end.
Cuomo said it was thus misleading for Merrill to tell a Congressional subcommittee at year end that it planned to make incentive compensation decisions at year end.
The attorney general also said Merrill learned less than a week after setting bonuses on December 8 that it would suffer $7 billion of additional quarterly losses, on top of $8 billion it already expected. By delaying losses, traders could make their results prior to the awarding of bonuses look better.
It appears that some of these losses may have been booked by Merrill employees who marked down their portfolios only after their 2008 bonuses were set, Cuomo said.
Bank of America on January 16 got a federal bailout that included $20 billion of capital from the Troubled Asset Relief Program, and a government agreement to share losses on $118 billion of assets, mostly from Merrill. The Charlotte, North Carolina-based bank has taken $45 billion overall from TARP.
Merrill ultimately lost $15.84 billion in the fourth quarter.
CUOMO SAYS CONFIDENTIALITY DEMAND IS NEW
Cuomo also said that neither Lewis nor Thain in depositions last month could recall any time in their seven decades of banking combined when compensation had to stay confidential.
Have you ever given anyone instruction to keep their compensation confidential? Eric Corngold, a lawyer in Cuomo's office, asked Lewis in a February 26 deposition.
No, Lewis responded.
In the 40 years that you have been at Bank of America?
Not that I recall.
Cuomo and Rep. Barney Frank, who chairs the U.S. House of Representatives Financial Services Committee, on Monday demanded information on all people who received more than $1 million in bonuses at both Bank of America and Merrill.
Bank of America shares closed Wednesday up 14 cents at $4.93. They have fallen 85 percent since the Merrill acquisition was announced last September 15.
The case is Cuomo v. Thain, New York State Supreme Court (Manhattan), No. 400381/2009.
(Reporting by Jonathan Stempel; Editing by Tim Dobbyn)