Reader Russell had wondered whether the attorney general of North Carolina might go after Bank of America over the difficult-to-rationalize bonuses paid to Merrill staff, given that the Charlotte bank had signed off on them (failing to inform and obtain consent Bank of America would have been grounds for terminating the deal).
I had thought it unlikely that the AG of the state in which Bank of America was headquartered would be likely to pursue the big bank. Attorneys general tend not to make waves with their state’s biggest employer (even in the communist state of New York, look what happened to Eliot Spitzer).
However, much to my surprise, the North Carolina AG, Roy Cooper is at least taking names and making waves. It remains to be seen whether this goes beyond the political theater stage. A Civil Investigative Demand, the North Carolina analogue to a subpoena, has apparently been issued, but it isn’t clear what legal theory Cooper is relying upon. Note also that New York attorney general Andrew Cuomo is also pursuing the Merrill bonuses. Another sign of changes in the zeitgeist, or merely a reflection in the dramatic fall in the standing of banks?
From the Charlotte Observer:
N.C. Attorney General Roy Cooper wants Bank of America Corp. to immediately disclose the amount in bonuses it’s paying employees this month for their work in 2008, according to a letter sent to the bank’s board of directors on Thursday.
Cooper also asked the board for an explanation “as to the appropriateness of any bonuses while public money is being provided to the bank,” the letter states. The request follows an earlier demand by his office for records on bonuses paid by merger partner Merrill Lynch & Co. as well as the bank’s acceptance of government assistance.
The new demand follows a Capitol Hill appearance Wednesday by Bank of America chief executive Ken Lewis and seven other CEOs whose banks have received money from the Troubled Asset Relief Program. During his testimony, Lewis faced questions about the bonuses paid by Merrill in December shortly before Bank of America bought the New York investment bank. Lewis noted that his Charlotte bank is paying reduced bonuses this month.
“After the acceptance of public funds, the payment of additional discretionary bonuses under these circumstances is most troubling,” Cooper wrote. The attorney general’s earlier “investigative demand” required the bank to produce records, including information on the bank’s bonuses, by March 4….
Half of the 10 “bands” of Bank of America employees are eligible for year-end incentive pay. Workers have been learning of their lowered payouts in recent weeks. The company employs about 301,000 worldwide…
Since taking federal money, banks have been under pressure from taxpayers and lawmakers to show they’re lending the money to consumers and businesses and not doling it out for expenses perceived as unnecessary.
Bonuses have been a particular flash point. New York Attorney General Andrew Cuomo is also investigating the $3.6 billion in Merrill bonuses, and this week he said that Bank of America acted with “apparent complicity” to Merrill’s bonus plan. Bank of America says those bonus decisions were made by Thain and other Merrill officials.
Lewis told the House Financial Services Committee Wednesday that the bank urged Merrill to slash bonuses, particularly for top executives. But he added that he had no legal right at the time to tell Merrill what to do, since it was still an independent company. Merrill’s fourth-quarter losses ultimately exceeded $15 billion.
Bank of America traditionally pays out its employee bonuses on the 15th of February. In good years, the money can provide a boost to consumer spending in Charlotte.