Directorship | Boardroom Intelligence » merrill lynch

Feinberg May Rein in Employee Pay

News Editor — Thu, 08 Oct 2009 15:21:18 +0000

Treasury Department Compensation Master Kenneth Feinberg now plans to tie employee compensation to their TARP-funded company’s stock price, reports the New York Times. Should business falter, bonuses would not be administered. Incidentally, those restrictions were made as part of Merrill Lynch’s compensation plan in 2006, two years before the company collapsed and was purchased by Bank of America. One weak spot in Merrill’s plan was that employees were not deterred from taking unwise risks, causing the brokerage giant to fall into the hands of Bank of America. NYT writer Louise Story questions whether Washington can really control pay on Wall Street and whether Feinberg and federal regulators can back up their efforts to ensure their plans work. “Hindsight in these plans is 20/20,” said Charles M. Elson, a professor of corporate governance at the University of Delaware. “Feinberg is going to be coming up with a model for the bailed-out banks, and the question is, will he use a model like this? He can’t possibly know what the next few years will bring for these companies.” In January, the Merrill plan will expire and stock held within it will be awarded to executives who are still at Bank of America or those who have retired. Most executives have broken even and the top six executives will if Bank of America’s share price reaches $30 by January, from its current value of $17.35 now. Regular investors couldn’t expect to break even unless the stock price quadrupled.

Krawcheck Says She Won’t Succeed Lewis

News Editor — Mon, 05 Oct 2009 20:28:50 +0000

Sallie Krawcheck, head of Bank of America’s wealth management, says she has no plans to do “stupid things” to pay policies that might spur financial advisers to leave the bank, reports Bloomberg. In response to questions concerning whether she plans to make drastic changes to financial advisers’ compensation, Krawcheck said: “We are not doing any of that stuff.”

Krawcheck, the former head of Citigroup’s Smith Barney wealth-management division, joined Bank of America in August. Chief Executive Officer Kenneth Lewis announced last week that he would step down at the end of this year, fueling much speculation on who will replace him.

According to Reuters, Merrill Lynch’s name and long-time bull logo will be reinstated, the company known as Merrill Lynch Wealth Management. The new unit will be one of the two primary units in Bank of America’s Global Wealth and Investment Management division, according to Krawcheck.

During a CNBC interview, Krawshack , said that she would “smash U.S. Trust and Merrill Lynch together.” As to whether Krawcheck plans to replace Kenneth Lewis as Bank of America’s CEO, “I’m very much focused on the job I’m doing.”

BofA Hands Over Additional Merrill Lynch Documents to Congressional Committee

News Editor — Wed, 23 Sep 2009 14:20:54 +0000

Bank of America will give more documents to a congressional committee probing its fast-paced acquisition of struggling brokerage house Merrill Lynch, according to the Associated Press. The bank will provide the House Committee on Oversight and Government Reform all the documents it requested, except for those protected by attorney-client privilege, according to committee chairman Edolphus Towns. Towns said in a letter Friday that Bank of America was hiding behind attorney-client privilege, which Congress can refuse to recognize during its investigations. Bank of America spokesperson Scott Silvestri said that Towns will meet with a member of the bank’s executive management team.

Deadline Looms for BofA

News Editor — Mon, 21 Sep 2009 13:53:37 +0000

Facing a Congressional probe that aims to take apart its discussions with Merrill Lynch late last year, Bank of America has until noon today to present the relevant information requested by the Committee on Oversight and Government Reform, according to the New York Times. Having fallen back on the privacy guaranteed by the attorney-client privilege, BofA now faces a rejection of such a right by Committee Chairman Edolphus Towns, who is demanding information related to BofA’s knowledge of the tremendous losses suffered by Merrill prior to its acquisition. BofA is also facing inquiries from the Securities and Exchange Commission and the New York attorney general’s office.

Cuomo Subpoenas Five BofA Directors

News Editor — Thu, 17 Sep 2009 14:54:20 +0000

New York Attorney General Andrew Cuomo issued five subpoenas to directors at Bank of America today in connection with his office’s investigation of the bank’s acquisition of Merrill Lynch at the beginning of the year, according to Forbes. The five directors—William Barnet, John T. Collins, General Tommy Franks, Walter E. Massey, and Thomas J. May—were the first of the fifteen that served on the BofA board during the Merrill Lynch merger. Only Massey and May still sit on the BofA board. Cuomo’s case is that BofA directors knew of the mounting losses at Merrill Lynch without disclosing such information to the shareholders that approved the buyout on December 5.

McCann Calls on Judge to Remove BoA’s Non-Compete Clause

News Editor — Wed, 16 Sep 2009 09:23:12 +0000

Robert McCann, the former Merrill Lynch brokerage head is to ask a New York State judge to grant him “emergency” relief that will force Bank of America to let him take another job. Bank of America fired McCann without cause after rejecting his offer to resign, part of “vengeful conduct intended to both punish and humiliate” him for trying to quit the bank, McCann said in court papers. Bloomberg reported McCann sued the bank in New York State Supreme Court last month, arguing he will suffer “irreparable harm.” He seeks an immediate lifting of the non-compete clause from Justice Melvin Schweitzer in Manhattan. A hearing is scheduled today. “Bank of America is now threatening to enforce a non-competition clause and prevent me from accepting the opportunity to go back to work in a ‘once in a lifetime’ role,” McCann said. “At age 51, given the recent contraction in the financial industry and the concomitant scarcity of senior positions, it is fair to say that I may never see a job opportunity like this again,” he said. McCann announced plans to leave Bank of America in January, less than a week after the company completed its $18.5 billion acquisition of Merrill Lynch. He said in the suit that he left for “good reason” after his role was “severely diminished” and he didn’t get a bonus following the sale. After initially saying McCann’s resignation would be effective in July, the bank fired him in February. Steven Eckhaus, McCann’s lawyer, said his client will ask in court today for Schweitzer to lift Bank of America’s non- compete clause. Eckhaus wouldn’t say what position McCann would like to take if the judge grants his request. However, UBS, Switzerland’s largest bank, was close to hiring McCann as head of its wealth management unit in the Americas, it was reported earlier.

Court Rejects SEC’s BoA Settlement

News Editor — Tue, 15 Sep 2009 09:23:31 +0000

A U.S. federal judge has reprimanded the Securities and Exchange Commission by throwing out a $33 million settlement between the regulator and Bank of America, calling the agreement “cynical” with a trial now likely next year. Judge Jed Rakoff said the agreement – to settle allegations that BofA made misleading statements to shareholders – was a “contrivance designed to provide the SEC with the facade of enforcement”, said the Financial Times. He said the original settlement failed to identify individuals responsible for the alleged misstatements. And, in the proposed settlement, the SEC claimed BofA – in the November prospectus describing the acquisition of Merrill Lynch– misled shareholders when it said that no large bonuses would be paid to Merrill executives prior to the closing of the merger without BofA’s consent. But there was a side agreement to the original merger document, struck in mid-September 2008, allowing Merrill to pay up to $5.8 billion in bonuses. The SEC alleged that the side agreement, not included in the prospectus, amounted to a misleading statement on the part of BofA. The bank agreed to settle the action for $33m last month, without admitting any liability – a standard component of SEC settlements. Under Rakoff’s ruling, the SEC will have to prove its allegations at a trial. The judge said BofA’s reliance on $45 billion in taxpayer funds gave the matter additional importance. He gave both parties until last week to persuade him that the $33 million settlement should be accepted. Meanwhile, the New York Attorney General’s office is preparing charges against several high-ranking Bank of America executives over the bank’s alleged failure to disclose details about its acquisition of Merrill Lynch, said Associated Press. Attorney General Andrew Cuomo’s office is likely to file civil charges against the executives over their role in failing to alert shareholders to mounting losses as well as accelerated bonus payments at Merrill.

Cuomo Scrutinizes BofA’s Firing of GC

News Editor — Wed, 09 Sep 2009 09:59:24 +0000

Bank of America is facing scrutiny for the timing of dismissing its general counsel, Timothy J. Mayopoulos, which took place four days after bank shareholders voted to approve the Merrill Lynch merger. Mayopoulos was told he was no longer needed at the company. Now, New York’s Attorney General Andrew Cuomo and other federal investigators are examining why the bank’s executives did not tell shareholders about billions of dollars worth of bonuses as well as huge losses at Merrill Lynch before the deal, said the New York Times. Mayopoulos was let go the day the bank informed its board that Merrill was losing money at an unexpected pace. He was immediately escorted from the building without being permitted to return to his office, the people with knowledge of situation said. His dismissal came six days after Mayopoulos spoke with the bank’s chief financial officer about mounting losses at Merrill Lynch, which were not disclosed to shareholders before the deal closed. As general counsel, Mayopoulos was responsible for advising the bank on its disclosure decisions. It is unclear how he advised executives to handle the information on Merrill’s bonuses and losses, which some shareholders later said would have changed their mind about approving the merger. In testimony to Cuomo’s staff in August, Mayopoulos cited legal ethics rules and declined to provide specifics on the advice he gave the bank. Cuomo has since asked the bank in a letter to grant Mayopoulos and the bank’s other lawyers permission to respond. By invoking the confidentiality of legal advice, Bank of America was “hindering this office’s ability to make fair and fully informed decisions as to what charges, if any, to bring and whether individual Bank of America officers should be charged,” Cuomo’s office wrote. Mayopoulos is now the general counsel of Fannie Mae.

Could the BofA Case Actually Boost SEC Clout?

News Editor — Thu, 27 Aug 2009 14:14:32 +0000

The holdup of a settlement between the Securities and Exchange Commission and Bank of America over bonuses paid to Merrill Lynch, which Bank of America acquired, has been an embarrassment for the SEC and a rebuke to its settlement process. Yet it could end up with more power when the dust clears. According to a report by Reuters, the Commission may emerge with greater power to extract settlements with real teeth in corporate enforcement cases, even after a federal judge has blocked its high-profile settlement with Bank of America Corp.

U.S. District Judge Jed Rakoff has faulted the SEC for appearing to let the bank off too easily, and dismissed as nonsensical why the bank would agree to pay anything without admitting it had done anything wrong.

Governance experts said the case will strengthen the SEC’s hand in future settlements, as the agency tightens oversight and tries to rebuild a reputation for aggressiveness after a slow year for enforcement. It may also prompt more transparency by companies, even without formal acknowledgment of wrongdoing.

Update: BofA Defends SEC Settlement

News Editor — Tue, 25 Aug 2009 00:20:33 +0000

Bank of America and the Securities and Exchange Commission defended a settlement over the bank’s failure to disclose details about Merrill Lynch’s bonuses ahead of a shareholder vote on the merger, according to The New York Times. Bank of America said in its court filing that it behaved properly. The SEC said the settlement was the result of an “arms-length negotiation.” Federal District Court Judge Jed. S. Rakoff of Manhattan said the bank’s $33 million settlement with the commission seemed “strangely askew.” He questioned the SEC’s decision to charge the bank at the corporate level rather than individual executives. “I cannot ignore issues of responsibility,” Judge Rakoff said at the hearing on Aug. 10. “Was there some sort of ghost that performed those actions?” Both parties will have two weeks to respond to each other’s filings. If Rakoff doesn’t approve, then SEC is expected to drop the case.

BofA Says $33M Fine is Appropriate

News Editor — Mon, 24 Aug 2009 19:11:58 +0000

Bank of America is trying to convince a district judge that a $33 million fine administered by the SEC in response to faulty disclosures relating to the bank’s acquisition of Merrill Lynch is an appropriate penalty, according to Bloomberg. The SEC, which penalized BofA earlier this month in a settlement that would keep the bank out of a prolonged legal battle, suggested the penalty, but the fine must first be approved of by Judge Jed Rakoff. Rakoff has claimed that the conflict between regulators and BofA lacks “transparency,” and that there were still questions about the bank’s conduct in the weeks leading up to its purchase of Merrill. Rakoff claims that he won’t approve any settlement prior to September 9.

Merrill and BofA Face Pressure on $3.6 Billion Bonuses

News Editor — Mon, 24 Aug 2009 15:52:09 +0000

Judge Jed S. Rakoff, a United States District Court judge in Manhattan, wants to hold individual executives responsible for the $3.6 billion of bonuses paid and kept secret from shareholders during the merger of Merrill Lynch with Bank of America. Rakoff is the first judge to demand recipient names, according to The New York Times. Rakoff is also questioning the fairness of the SEC’s $33 million fine because it was paid by shareholders who were unaware of the bonuses. The judge also noted that BofA’s second bailout essentially paid for the firm’s executive bonuses. Previously, Judge Rakoff ruled in the WorldCom case, raising the fine from the SEC’s recommended $500 million to $700 million, and demanded that amount be paid out to shareholders. “I could have put the company out of business,” he acknowledged. “But it seemed to me that would have been 60,000 jobs needlessly lost.” He also oversaw the review of the company’s corporate governance practices. “The SEC has to have noticed by now that most of the country agrees with the sentiments expressed by Rakoff,” said John C. Coffee, a Columbia Law School professor who has taught a course along with Judge Rakoff for 21 years. “This builds up pressure on Bank of America and the SEC.”

Judge Rejects BofA Bonus Settlement

News Editor — Tue, 11 Aug 2009 17:55:54 +0000

A New York judge has rejected a $33 million settlement between Bank of America and the Securities and Exchange Commission in regard to improper bonuses paid out by the acquired Merrill Lynch last year, according to Reuters. Merrill Lynch, which was acquired by Bank of America at the beginning of 2009, paid out $3.6 billion in year-end bonuses despite suffering losses of $27.61 billion. These payouts include 696 bonuses of $1 million or more. The rejection of the proposed settlement by Judge Jed Rakoff will likely lead to further examination of the bonuses, and could cast negative light on BofA and its CEO, Ken Lewis. The SEC may want to attempt to prove that BofA and/or Merrill “essentially lied” about the bonuses, said Rakoff. “What the judge is trying to get at is, was there actual fraud here?” said Cornelius Hurley, director of the Morin Center for Banking and Financial Law at Boston University. “The risks are they go back to their corners, and the SEC really does attempt to prove wrongdoing.”

BofA and SEC Defend $33M Agreement

News Editor — Mon, 10 Aug 2009 19:52:27 +0000

Bank of America and federal regulators will defend their case for a $33 million settlement before a U.S. District Court Judge Jed Rakoff refused to give his approval on the deal, reports CNNMoney. The Securities and Exchange Commission reached the agreement last week after it filed charges against the bank for allegedly misleading investors concerning billions of dollars in pay bonuses paid to Merrill Lynch executives. Rakoff’s ruling is not surprising as much of the settlement raises questions. “The SEC must have wanted a quick settlement,” said John Coffee, professor of law at Columbia University. “Judge Rakoff has done exactly the right thing.” The news conerning Merrill Lynch’s settlements came to light after New York Attorney General Andrew Cuomo accused the firm of “secretly” rewarding executives before its merger with BofA concluded.

NY Congressman Demands Documents on BofA’s Merrill Deal

News Editor — Fri, 07 Aug 2009 11:51:28 +0000

A U.S. House lawmaker is insisting that Bank of America turn over new documents to investigators about its decision to not publicly disclose ballooning losses at Merrill Lynch & Co. ahead of a shareholder vote last December. Rep. Edolphus Towns (D., N.Y.), who chairs the House Committee on Oversight and Government Reform, has asked Bank of America Chief Executive Kenneth Lewis for a range of documents detailing the deal for Merrill Lynch, said the Wall Street Journal. The documents requested include emails and documents dealing with losses and loss projections at Merrill Lynch; records covering negotiations with the federal government on bailout funds received by the bank; and the details of any legal advice received by the bank on disclosure of the losses or government aid. Towns set a deadline of noon EDT on Aug. 14 for Bank of America to turn over the documents.

Judge Demands Hearing in SEC Case Against BofA

News Editor — Thu, 06 Aug 2009 12:25:20 +0000

Judge Jed S. Rakoff has refused to sign off on a consent decree between the Securities and Exchange Commission and Bank of America, saying unless there is a hearing, the public will not know details of the Wall Street bailout. He has set a hearing for Monday over the charges, in which the SEC alleged that the bank misled shareholders about billions of dollars in bonuses promised to Merrill Lynch employees when the bank bought Merrill at the height of the financial crisis last year, said the Wall Street Journal. The SEC and Bank of America had sought the judge’s approval for the settlement, in which Bank of America agreed to pay $33 million to end the civil lawsuit. The SEC complaint found fault with proxy documents that Bank of America and Merrill sent to their respective shareholders in November 2008 to vote on the $50 billion takeover. The SEC said the documents show Merrill wouldn’t pay year-end bonuses or other compensation before the deal closed without Bank of America’s consent. According to the complaint, the bank had already agreed that Merrill could pay such bonuses up to $5.8 billion. Judge Rakoff wrote: “Despite the public importance of this case, the proposed consent judgment would leave uncertain the truth of the very serious allegations made in the complaint.”

Last Top Merrill Lynch Exec Exits BofA

News Editor — Wed, 05 Aug 2009 11:58:05 +0000

Dan Sontag is leaving his post as leader of Merrill Lynch’s 15,000 financial advisers following Sallie Krawcheck’s arrival as his new boss, reported the Financial Times. The move marks the departure of one of the last Merrill from Bank of America’s senior management. Mr Sontag, a 31-year veteran of Merrill, said he was retiring from his post as head of the brokerage force, but he pledged his support for Krawcheck, whose arrival at BofA as head of global wealth and investment management was announced on Monday. “We’ve worked through the major challenges we had to get through and now I ask all of you to step up to the plate and drive the business to where we know it can go,” Mr Sontag said, according to a BofA source. “I’ve offered Sallie any help I can provide and ask the leadership team to give Sallie the same support you gave me.” Since last October, when the management team for Merrill Lynch’s investment banking, capital markets and wealth management units was announced following Merrill’s agreement to sell itself to BofA, several Merrill veterans have left the company, either of their own volition or with a push from BofA headquarters in Charlotte, North Carolina.

TARP Banks Paid $32.6B in Bonuses

News Editor — Fri, 31 Jul 2009 10:24:08 +0000

Citigroup, Merrill Lynch and seven other U.S. banks paid $32.6 billion in bonuses in 2008 while receiving $175 billion in taxpayer funds, according to a report by New York Attorney General Andrew Cuomo. Bloomberg reports Cuomo analyzed 2008 bonuses at nine banks that received Trouble Asset Relief Program financing from the U.S. government. New York-based Citigroup and Merrill, which has since been taken over by Bank of America, received TARP funding totaling $55 billion, Cuomo said. “When the banks did well, their employees were paid well. When the banks did poorly, their employees were paid well,” Cuomo’s office said in the 22-page report. “When the banks did very poorly, they were bailed out by taxpayers and their employees were still paid well. Bonuses and overall compensation did not vary significantly as profits diminished.” The top 200 bonus recipients at JPMorgan Chase & Co. received $1.12 billion last year, while the top 200 at Goldman received $995 million. At Merrill the top 149 received $858 million and at Morgan Stanley, the top 101 received $577 million. Those 650 people received a combined $3.55 billion, or an average of $5.46 million. “Attorney General Cuomo’s report on executive pay at companies receiving taxpayer bailouts is shocking and appalling,” said House Committee on Oversight and Government Reform Chairman Edolphus Towns, a Democrat from New York. http://www.bloomberg.com/apps/news?pid=20601087&sid=aHURVoSUqpho

Fed Leans on BofA to Recast its Board

Joseph McCafferty — Thu, 01 Jan 1970 00:00:00 +0000

Bank of America has been placed under a regulatory sanction that requires the firm to redesign both its board and its policies towards risk and liquidity, according to the Wall Street Journal. BofA is bound to a memorandum of understanding that dictates that the bank must address its defects or face penalty.

The memorandum, imposed in May, contains a series of deadlines that BofA must adhere to. These deadlines include the reseating of a majority of its directors; BofA has so far replaced four of its 16 directors.

Much of the memorandum’s focus is on stabilizing BofA after its acquisition of Merrill Lynch earlier this year. “Management has taken on significant risk, perhaps more than anticipated at the time the acquisition was proposed,” said one official. “More than normal supervisory attention will be required for the foreseeable future.”

Other banks that have received similar memoranda include Citigroup, which is in negotiations with the Federal Deposit Insurance Corp., and smaller regional banks Colonial BancCorp and Riverview Bancorp.

BofA Losing Former Merrill Bankers

News Editor — Wed, 08 Jul 2009 04:00:00 +0000

The merger between Bank of America and Merrill Lynch has spurred the departure of at least 18 veteran bankers within the acquired investment bank, according to the Wall Street Journal.

At BofA, where investment banking plays a distant second fiddle to the bank’s commercial banking empire, the departures won’t register as deeply as one might expect, according to company employees quoted by the WSJ. While Merrill was among the world’s top five in terms of M&A volume over the last five years, BofA never ranked higher than twelfth during this period.

Some believe the Merrill departures are a result of an adversarial relationship between the two conjoined banks. Says investment banker Peter Solomon, “You have Merrill people going into a place where there are no advocates, and they need to feel they have one.”

The Merrill departures include Alan Hartman, who earlier this year worked on Pfizer’s acquisition of Wyeth, and Eric Heaton, a former Merrill treasurer, who in February defected to Deutsche Bank.