A judge on Monday ruled that former Merrill Lynch & Co Chief Executive John Thain is free to disclose the names of individuals who received bonuses awarded by the former investment bank before it was bought by Bank of America Corp
The ruling by New York State Supreme Court Justice Bernard Fried is a victory for state Attorney General Andrew Cuomo, who filed a motion in court on Monday to compel Thain to testify about bonuses awarded to individuals other than Merrill's top five executives.
Cuomo began questioning bonus plans in October after nine banks received $125 billion in U.S. Treasury funds. Executive compensation has become a hot-button issue in the recession, with Cuomo leading the charge in challenging banks that awarded bonuses during a year when firms collapsed and taxpayers were asked to help prop up failing banks.
Thain, ousted weeks after the merger of Merrill and BofA, testified about the bonuses on February 19. Cuomo's office said it plans to resume the deposition at 4 p.m. (2100 GMT) Tuesday.
Andrew Levander, a lawyer for Thain, said Fried will decide after a March 13 hearing whether the names will become public. Thain had contended that Bank of America blocked him from testifying because of confidentiality concerns.
The court has ruled appropriately, Levander said. We've answered every question except for a handful of questions that Bank of America directed us not to answer, on grounds of confidentiality. This ruling takes us out of the middle.
Bank of America spokesman Scott Silvestri said: We are pleased with the ruling, which is consistent with the company's position all along that the information is private, and should remain private to protect the rights of the individuals and the competitive position of the company.
CUOMO ALLEGED OBSTRUCTION
Cuomo said in a court motion on Monday that Thain and Bank of America obstructed his probe into some $3.6 billion of executive bonuses awarded to Merrill executives late last year, even as the bank was recording a $15.31 billion quarterly loss.
The attorney general said that at a February 19 deposition, Thain failed to answer questions about the determination and amount of individual bonus awards for all but five employees at Merrill, none of whom received a bonus.
Thain, who played a central role in awarding the bonuses before the January 1 merger, said Bank of America told him not to discuss the 2008 bonuses, according to Cuomo's motion.
Cuomo said Bank of America's instruction has no legitimate basis and obstructs the Attorney General's ability to exercise its obligations to investigate and enforce violations of New York's Martin Act.
The Martin Act gives Cuomo extraordinary power in securities litigation and fighting financial fraud.
Bonus payments at Merrill were typically set and paid after the end of the calendar year. But according to court papers, 2008 bonuses were set by December 8, before Merrill knew year-end results.
Two weeks ago, Cuomo accused Merrill of secretly accelerating bonus payments, giving at least $1 million to each of nearly 700 employees, even as the brokerage lost about $27 billion during the year.
The attorney general's office said it believes Merrill's pretax losses turned out to be approximately $7 billion more than it anticipated when it set the bonus pool. Aftertax losses were at least $5 billion more than anticipated, the office said.
Merrill Lynch's bonus pool was not altered to reflect these multibillion-dollar losses, even though results are supposed to be a key component of setting bonus pools, according to the court document.
(Reporting by Grant McCool and Jonathan Stempel; Additional reporting by Edith Honan and Elinor Comlay; Editing by Gary Hill)