Compliance February 11, 2009

Probe of Merrill Bonuses Continues

New York Attorney General Andrew Cuomo continues to blast Merrill Lynch for its bonuses paid before the Bank of America (BoA) acquisition.
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Cuomo sent a letter to U.S. House Financial Services Chairman Barney Frank detailing the bonuses. In January, Cuomo issued a subpoenas to Merrill executives, including former CEO John Thain (see “Thain Receives Subpoena in Merrill Bonuses Probe’).

Cuomo is probing $3.6 billion in bonuses paid by Merrill Lynch just days before the BoA takeover. In his letter, Cuomo said he requested information about Merrill’s expected bonuses back in October, but never received the information.

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He wrote: “Rather, in a surprising fit of corporate irresponsibility, it appears that, instead of disclosing their bonus plans in a transparent way as requested by my Office, Merrill Lynch secretly moved up the planned date to allocate bonuses and then richly rewarded their failed executives.’ He said that Merrill Lynch had never before awarded bonuses at such an early date, and did so in order to dole out huge bonuses before the Bank of America takeover and an announcement of bleak fourth-quarter earnings.

Cuomo noted that Merrill Lynch suffered losses requiring Bank of America to seek federal aid, thus burdening the taxpayers. “Taxpayers are being crushed by the losses on Wall Street and now are paying billions in bailout funds,’ he wrote. “My investigation into whether these bonus payments violated New York’s fraudulent conveyance statute and whether the lack of disclosures concerning these payments and other matters violated the Martin Act will continue.’

Deals & People February 11, 2009

NFP Stock Surges

National Financial Partners (NFP) saw its stock soar after it announced it might pay off outstanding amounts in its credit facility, Reuters reported.
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Shares of the company were trading up 62% at $3.43 on the New York Stock Exchange.

In a conference call with analysts, the company said it has additional financial flexibility as it amended its credit facility in December. The company also posted quarterly results that exceeded analyst expectations, the news report said.

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NFP reported a fourth quarter 2008 net loss of $10.7 million, or a loss of $0.26 per diluted share, compared with net income of $19.3 million, or income of $0.47 per diluted share, in the fourth quarter of 2007, according to a release of its earnings. Fourth quarter 2008 cash earnings was $28.4 million, or $0.70 per diluted share, compared with $33.6 million, or $0.82 per diluted share, in the fourth quarter of 2007.

Operating performance improved from the third to the fourth quarter of 2008, according to the release. “As we outlined previously, we are focused on reducing firm operating expenses,’ said Jessica Bibliowicz, chairman, president, and CEO, in the release. “Our efforts impacted gross margin percentage, which improved 1.7 percentage points sequentially in the fourth quarter of 2008. In addition, we executed an amendment to our credit facility agreement in December, achieving our goal of obtaining additional financial flexibility in a difficult economic environment. Our focus remains on operating as efficiently as possible to maintain the profitability of our firms in a challenging economy.’

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