Controversy over executive bonuses turned back on feds
NEW YORK (Legal Newsline) - Federal officials are beginning to feel the heat in bonus controversies that surround financial services firms that were bailed out by taxpayers.
On Tuesday, CtW Investment urged the federal Securities and Exchange Commission to force Bank of America to release the names of former Merrill Lynch executives who received billions of dollars in bonuses before Merrill Lynch was purchased by Bank of America.
Also, President Obama's administration has received some backlash over his stance on American International Group's recent $165 million in retention bonuses that he promised to block.
A Fox News article quotes a pair of Congressmen who feel Treasury Secretary Timothy Geithner is in over his head.
"It seems like they are an administration in disarray," House Minority Whip Eric Cantor (R-Va.), said Tuesday, according to the report.
Monday, New York Attorney General Andrew Cuomo sent a letter to AIG CEO Edward Liddy warning Liddy that a subpoena would be sent his way if he did not disclose the names of individuals set to receive millions of dollars in retention bonuses out of the company's Financial Products Retention Plan.
Cuomo gave AIG, which received $173 billion in taxpayer funds as part of the recent federal bailout of several financial services providers, until 4 p.m. to comply. A report by The Associated Press says AIG missed the deadline.
Obama had promised to try to block the bonuses Sunday. In the Fox News report, Sen. Richard Shelby (R-Ala.) wondered if Geithner knew about them and looked the other way.
"There's either competence or incompetence going on here, and it looks like a lot of incompetence," Shelby said in the report. "I think this is the tip of the iceberg."
"I think Secretary Geithner does not have his hands around the details of this, and if he does, then there's a lot more questions to be asked."
Cuomo wrote Rep. Barney Frank (D-Mass.) Tuesday to inform him of the details he has obtained. He says the top recipient of the bonuses received more than $6.4 million, and the top seven each received more than $4 million.
The top 10 received a combined $42 million, 22 individuals received $2 million or more and 73 received a bonus of more than $1 million.
In addition, 11 of those who received a bonus of more than $1 million are no longer working at AIG.
Cuomo is still waiting on a ruling from New York County Supreme Court Judge Bernard Fried in the Bank of America matter.
Fried said he would try to decide in the next week if Bank of America must disclose the names of former Merrill Lynch executives who received billions of dollars in bonuses before Bank of America's purchase of Merrill Lynch became final.
Bank of America CEO Kenneth Lewis said he would give Cuomo the names of 696 Merrill Lynch employees who were given bonuses before Bank of America completed its purchase of Merrill Lynch if they were kept confidential. The bonuses totaled $3.6 billion.
Friday's hearing can be heard here.
CtW says shareholders must know where the bonuses went if they are to make an informed decision in Bank of America's coming directors election.
"Public outrage over AIG's $165 million in bonuses reinforces shareholder anger at the $3.6 billion bonus fiasco perpetrated by BAC and MER last December," said William Patterson, the investment group's executive director.
"It may be too late to recover the Merrill payouts, but shareholders can hold accountable the Bank of America directors responsible at the bank's upcoming director election. The secret bonus agreement is critical to that evaluation."
In addition to urging the SEC's Division of Corporation Finance to get involved, CtW wants the SEC's Division of Enforcement to investigate whether or not Bank of America violated federal securities laws by failing to disclose Merrill Lynch's large fourth-quarter losses prior to the Dec. 5 merger vote and again before the Jan. 1 merger closing.
From Legal Newsline: Reach John O'Brien by e-mail at email@example.com.
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