New Subpoenas in Bank of America Merger Probe

March 4, 2009 — -- Seven executives who received multimillion-dollar cash-and-stock pay packages from Merrill Lynch just prior to its merger with Bank of America will be the latest executives from the two firms to face subpoenas from New York Attorney General Andrew Cuomo, according to sources involved in the investigation into the merger's tangled finances.

At least four other senior executives already have been subpoenaed in Cuomo's investigation and at least three have testified.

The latest executives facing subpoenas had cash and stock paydays in 2008 that ranged from about $13 million to $39.4 million -- largely from the bonus component of their pay packets, The Wall Street Journal reported today. The reported compensation occurred during a year when Merrill was a failing institution.

Cuomo's investigation is probing the merger and the so-called "variable incentive compensation program" that resulted in $3.6 billion in bonuses in a year that Merrill lost $27.6 billion.

Under the broad authority given his office as New York's attorney general, Cuomo seeks to determine if any securities laws were violated in the way the performance bonuses were awarded on an accelerated schedule in advance of the merger by a team that included former Merrill CEO John Thain in consultation with top Bank of America officials.

To that end, he has subpoenaed Thain and Ken Lewis, the CEO of Bank of America, as well as two top aides involved in the merger and bonus process.

That probe is still in a "fact gathering stage" according to sources familiar with the investigation.

Merrill's bonuses historically were paid following the close of a calendar year. But the 2008 bonuses were paid in December, just weeks before the January date on which the merger was finalized.

Amid failing banks and a recession, the astronomical compensation of bank and finance executives has become a hot-button issue.

According to the Journal, despite Merrill's losses of $27.6 billion in 2008, its top investment banker, Andrea Orcel, was paid about $33.8 million in cash and stock. The firm's head of global strategy, at Merrill "for only three months," Peter Kraus, had an employment contract worth $29 million. In addition, the Journal reported, Thomas Montag, the head of global sales and trading, made $39.4 million, although he joined the firm in August and had been there less than six months when the packages were awarded.