January 22, 2009, 9:39 am Merrill Reportedly Paid Bonuses Early as Merger Closed
DealBook - A Financial News Service of The New York Times
The controversy over Bank of America’s acquisition of Merrill Lynch appeared to grow on Thursday with a report in the Financial Times that Merrill paid out billions of dollars in bonuses to its employees three days before the sale went through — and well before it has paid out bonuses in previous years.
The bonuses were approved just before Bank of America learned that Merrill’s fourth-quarter losses would be much larger than it had expected, the report said. The swelling losses forced Bank of America to seek a new round of federal aid as it moved to complete the deal.
Citing an undisclosed source, the Financial Times said Merrill paid out an estimated $3 billion to $4 billion in bonuses in late December. It normally pays bonuses in late January or early February.
In its response to the report, Bank of America attributed the decision to John Thain, who had been Merrill’s chief executive until the deal closed on Jan. 1.
“Merrill Lynch was an independent company until January 1, 2009,” Bank of America said, according to The Financial Times. “John Thain decided to pay year-end incentives in December as opposed to their normal date in January. BofA was informed of his decision.”
Mr. Thain had reportedly lobbied for a $10 million bonus for himself, only to withdraw the request when the board balked. Mr. Thain has stayed on at the combined firm, where he oversees trading, investment banking and brokerage operations.
Breakingviews said the report just adds to the bad smell lingering over this financial merger, which was negotiated over a frenzied weekend last fall. It points out that BofA employees are still waiting to hear what their 2008 bonuses will be, and Merrill’s move is “almost certain to breed contempt among new colleagues.”
According to the timeline presented in the Financial Times, Merrill’s compensation committee approved the bonus payments three days after Merrill’s merger with Bank of America was approved by shareholder of both companies.
“Within days” of that approval, Bank of America learned of Merrill’s bigger-than-expected losses and began talks with the government for a new financial lifeline.
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January 22, 2009, 9:39 am
ReplyDeleteMerrill Reportedly Paid Bonuses Early as Merger Closed
DealBook - A Financial News Service of The New York Times
The controversy over Bank of America’s acquisition of Merrill Lynch appeared to grow on Thursday with a report in the Financial Times that Merrill paid out billions of dollars in bonuses to its employees three days before the sale went through — and well before it has paid out bonuses in previous years.
The bonuses were approved just before Bank of America learned that Merrill’s fourth-quarter losses would be much larger than it had expected, the report said. The swelling losses forced Bank of America to seek a new round of federal aid as it moved to complete the deal.
Citing an undisclosed source, the Financial Times said Merrill paid out an estimated $3 billion to $4 billion in bonuses in late December. It normally pays bonuses in late January or early February.
In its response to the report, Bank of America attributed the decision to John Thain, who had been Merrill’s chief executive until the deal closed on Jan. 1.
“Merrill Lynch was an independent company until January 1, 2009,” Bank of America said, according to The Financial Times. “John Thain decided to pay year-end incentives in December as opposed to their normal date in January. BofA was informed of his decision.”
Mr. Thain had reportedly lobbied for a $10 million bonus for himself, only to withdraw the request when the board balked. Mr. Thain has stayed on at the combined firm, where he oversees trading, investment banking and brokerage operations.
Breakingviews said the report just adds to the bad smell lingering over this financial merger, which was negotiated over a frenzied weekend last fall. It points out that BofA employees are still waiting to hear what their 2008 bonuses will be, and Merrill’s move is “almost certain to breed contempt among new colleagues.”
According to the timeline presented in the Financial Times, Merrill’s compensation committee approved the bonus payments three days after Merrill’s merger with Bank of America was approved by shareholder of both companies.
“Within days” of that approval, Bank of America learned of Merrill’s bigger-than-expected losses and began talks with the government for a new financial lifeline.
http://nymag.com/daily/intel/2008/12/how_peter_kraus_spent_his_bonu.html
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