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 The debacle that is the Merrill Lynch & Co. bonuses amid a fourth-quarter loss continues to be a huge headache for acquirer Bank of America Corp. (NYSE:BAC). Although the Merrill purchase has given the bank's bottom line a big boost (contributing $3.7 billion to the bank's first-quarter net income), the troublesome events that preceded the merger ($3.6 billion in early bonus money to Merrill employees combined with a $16 billion fourth-quarter loss) are problems that just won't go away for BofA's CEO Ken Lewis. (See BofA/Merrill Dealwatch here.)With the bank now staring at a February jury trial over whether information was withheld from shareholders on the two issues, Congress has jumped into the fray at the last minute and threatens to throw BofA's game plan into disarray. According to The New York Times: the bank is facing questions from a House panel, the Committee on Oversight and Government Reform, whose chairman, Representative Edolphus Towns, has told the bank that it cannot use attorney-client privilege when dealing with Congress. If Mr. Towns has his way, Bank of America would be forced to reveal information that would then affect a range of other investigations into the merger, including one by the attorney general of New York and another by the Securities and Exchange Commission. In a sternly worded letter on Friday, Mr. Towns, a New York Democrat, said the bank must divulge when it became aware of the enormous losses at Merrill last year, when it received a commitment from the federal government for a second round of bailout money and what legal advice its management received about whether it had to disclose those developments to the bank's shareholders." BofA was only given until Monday at noon to turn over the information, with Towns denying the bank's pleas for more time, and, unfortunately for Bank of America, Congress has the authority to disregard attorney-client privilege. . Once again Bank of America's management finds itself between a rock and a hard place over the Merrill acquisition. If it accedes to the congressional inquiry, the information is sure to be used against it in court come February. But if it refuses to cooperate with the House committee, it could find itself in even deeper trouble. It could ignore the subpoenas or invoke the Fifth Amendment, but both moves are likely to end with BofA having yet another court date, making that huge headache a massive migraine. - George White Also see: Cuomo slaps BofA's board with subpeonas Cuomo and BofA in bicep-flexing match BofA's saga over Merrill bonuses continues BofA settlement with SEC comes under scrutiny The quest for the truth from BofA BofA lawyers fire back at Cuomo
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From: lester b. seidel,
A corporation does not have a 5th amendment right to assert.
Posted on:
September 21, 2009 4:45 PM
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You have to pay executives, executive pay to keep them. I realize the public doesn't want to read about big bonuses when losses are reported but for the future of the company you need to keep the top talent.