AsiaOne : Merrill paid billions in bonuses early

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Merrill paid billions in bonuses early

Fri, Jan 23, 2009

Reuters

NEW YORK, USA - Merrill Lynch took the unusual step of accelerating bonus payments by a month last year, doling out billions of dollars to employees just three days before the closing of its sale to Bank of America (BoA), the Financial Times reported.

The timing is notable because the money was paid as Merrill's losses were mounting and Mr Ken Lewis, BoA's chief executive, was seeking additional funds from the United States government to help close the deal, the paper said on its website yesterday.

Merrill's compensation committee agreed to pay bonuses on Dec 29, at least one month earlier than usual, the paper said.

Yet within days of that committee meeting, the FT said, BoA officials became aware Merrill's fourth-quarter losses would be much greater than expected.

BoA, in a statement, told the paper, 'Merrill Lynch was an independent company until Jan 1. (Merrill CEO) John Thain decided to pay year-end incentives in December as opposed to their normal date in January. BoA was informed of his decision.'

Last week, BoA said it would receive US$20 billion (S$ 30 billion) in US Treasury investment on top of US$25 billion earmarked last fall for a combined BoA-Merrill. BoA said Merrill suffered a US$21.5 billion operating loss in the fourth quarter.

Despite the massive losses, Merrill set aside US$15 billion for 2008 compensation, 6 per cent lower than a year earlier.

A person familiar with the matter told the FT that about US$3 billion to US$4 billion of that compensation comprised annual bonuses.