Tuesday January 27, 06:09 PM
New York state to probe 'billions' in Merrill bonuses
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NEW YORK (AFP) - New York state officials said Tuesday they had begun a probe into "billions of dollars" in bonuses paid by investment giant Merrill Lynch (NYSE: MER - news) days before a takeover announced by Bank of America (NYSE: IKJ - news) .
State Attorney General Andrew Cuomo said his investigators had issued a subpoena to former Merrill chief executive John Thain and others to look at the "troubling" allegations.
The move is part of a probe into firms receiving aid from the US government's Troubled Asset Relief Program, a 700-billion-dollar rescue fund.
"Today, as part of our ongoing inquiry into executive compensation issues at institutions who have received TARP funds, my office issued subpoenas seeking the testimony of former Merrill Lynch CEO John Thain, as well as the testimony of Bank of America chief administrative officer J. Steele Alphin," Cuomo said in a statement.
"These subpoenas are part of an ongoing inquiry into billions of dollars in bonuses paid by Merrill Lynch late last year just days before Merrill was taken over by Bank of America," Cuomo said.
"The fact that Merrill Lynch appears to have moved up the timetable to pay bonuses before its merger with Bank of America is troubling to say the least and warrants further investigation."
Cuomo said the probe would be "conducted cooperatively and in coordination" with the special inspector general for the US Treasury's TARP program, Neil Barofsky.
Thain resigned Thursday from Bank of America, in which he has been head of global banking, securities and wealth management, after the banking giant said that "his situation was not working out."
On January 16, Bank of America received 20 billion dollars in fresh government capital to help shore it up after acquiring Merrill Lynch.
BofA had already received 25 billion dollars in capital injections from the TARP, set up in early October to aid at-risk firms in the global credit crisis.
On September 15, Bank of America agreed to buy Merrill Lynch for 50 billion dollars in a transaction that created the world's largest financial services company.
It also saved Merrill from what some analysts felt was a possible collapse in the wake of a meltdown at Wall Street giant Lehman Brothers (NYSE: LEH - news) . Lehman filed for bankruptcy protection on September 15.
There was no government aid at the time of the Bank of America announcement but some analysts have speculated that US Treasury officials had pledged to offer capital to help BofA absorb Merrill.
Although the former Wall Street giant's results were not included in the overall Bank of America financial report, Merrill Lynch lost 15.3 billion dollars in the fourth quarter.
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