NEW YORK (Reuters) – Merrill Lynch paid billions of dollars of bonuses to its employees, three days before completing its life-saving sale to Bank of America Corp (BAC.N), the Financial Times reported on its website on Wednesday.
The money was paid as Merrill’s losses were mounting, forcing Bank of America Chief Executive Kenneth Lewis last month to seek additional government support for the deal. Merrill’s compensation committee agreed to pay bonuses on December 29, at least one month earlier than usual, the paper said.
Yet within days of that committee meeting, the FT said, BofA officials became aware Merrill’s fourth-quarter losses would be much greater than expected.
Bank of America, 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. BofA was informed of his decision.”
Last week, Bank of America said it would receive $20 billion in U.S. Treasury investment on top of $25 billion earmarked last fall for a combined BofA-Merrill. [ID:nN16253682]
Bank of America said Merrill had a $21.5 billion operating loss in the fourth quarter.
Despite the massive losses, Merrill set aside $15 billion for 2008 compensation, 6 percent lower than a year earlier.
A person familiar with the matter told the FT about $3 billion to $4 billion of that compensation were annual bonuses. The bulk is comprised by salaries and benefits. (Reporting by Joseph A. Giannone; Editing by Anshuman Daga)