Merrill paid employee bonuses before sale to Bank of America
Collapsed banking entity Merrill Lynch accelerated the payment of bonuses to employees just days before closing its acquisition by the Bank of America.india Updated: Jan 22, 2009 17:01 IST
Collapsed banking entity Merrill Lynch accelerated the payment of bonuses to employees just days before closing its acquisition by the Bank of America, says a media report.
"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," the Financial Times has reported.
The daily pointed out that the timing is notable because the money was paid as Merrill's losses were mounting and Ken Lewis, BofA's Chief Executive, was seeking additional funds from the government's troubled asset recovery programme to help close the deal.
Last week, the US Federal government had pumped in another 20 billion dollars into Bank of America mainly to absorb losses incurred from the buyout of Merrill.
This is in addition to 25 billion dollars which it ploughed each into Bank of America and Merrill last year, respectively.
Despite Merrill reporting a massive loss of 21.5 billion dollars in the fourth quarter of 2008, the report noted that the company had "set aside 15 billion dollars for 2008 compensation, a sum that was only 6 per cent lower than the total in 2007, when the investment bank's losses were smaller".
"The bulk of 15 billion dollars compensation was paid out as salary and benefits throughout the course of the year," the report said. Further, attributing to a person familiar with the matter, the report said that an estimated three to four billion dollars was paid out in bonuses in December.
Merrill and the Bank of America shareholders had approved the takeover on December 5. "Three days later, Merrill's compensation committee approved the bonuses, which were paid on December 29," it added.