How big does a bonus have to be to appear on the radar screen of New York Attorney General Andrew Cuomo’s investigation of possible compensation abuses by financial firms receiving government bailout money? Apparently, it’s $250,000.
According to the Associated Press, Cuomo has subpoenaed Bank of America asking for a list of every executive receiving a bonus of more than that amount over the past two years. The attorney general’s office demanded the information after it was unhappy with the bank’s initial response to a letter asking for similar information, according to AP, which cited a person familiar with the investigation.
Previously it was reported that Cuomo had fired off letters to nine financial institutions, warning that using government money for bonuses could be considered “illegal fraudulent conveyances,” and lead to prosecution. He demanded detailed information about bonus-pool allocations from the boards of the nine institutions that received $125 billion from the Federal Reserve.
The nine firms Cuomo warned were Bank of America, Bank of New York Mellon, Citigroup, Goldman Sachs, JPMorgan Chase, Merrill Lynch, Morgan Stanley, State Street, and Wells Fargo. And he also asked their boards to explain what mechanisms they have put in place to protect taxpayer funds.
Anne Finucane, global marketing and corporate affairs executive ay Bank of America, Thursday said in Senate Banking Committee testimony that the bank’s available pool for executive bonuses this year will be reduced by more than 50 percent, according to Bloomberg. Also at the hearing, executives from JPMorgan, Goldman Sachs, and Wells Fargo, along with BofA, denied they have used the recapitalization funds to pay for executive compensation.
In fact, the banks say they have not yet calculated total compensation as they’ll be reviewing their firms’ year-end performance in the coming weeks. And in any event, they predict their employees will make less this year. “The funding received through the Capital Purchase Program will have absolutely no impact on the compact decision for JPMorgan Chase employees or executives,” testified chief risk officer Barry Zubrow.
Goldman’s general counsel said in prepared testimony that its payouts to employees will be “dramatically affected” by this year’s financial turmoil.
“Lenders who receive public funds should use those funds to lend,” committee chairman Christopher Dodd (D-Conn.) said at the hearing. “Many are failing to do so.”
In his earlier letter to the nine banks, Cuomo had warned that corporate expenditures and payments, made in the absence of fair consideration by undercapitalized firms, may subject the banks to prosecution. His big concern is that the banks are using government bailout money to pay the bonuses.
“In particular, it is vital that you immediately provide us with any and all information concerning your firm’s expected bonus pool for this year, both prior to and after you understood that the firm would be a recipient of taxpayer funds pursuant to the Troubled Asset Relief Program (TARP),” the letter stated. “Obviously, we will have grave concerns if your expected bonus pool has increased in any way as a result of your receipt or expected receipt of taxpayer funds from TARP.”
Sarah Johnson contributed to this article.