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Bloomberg, October 29, 2008 article


New York Demands Bonus Pay Data From JPMorgan, Citi (Update2)

By Karen Freifeld

Oct. 29 (Bloomberg) -- New York Attorney General Andrew Cuomo sent letters to JPMorgan Chase & Co., Citigroup Inc., Wells Fargo & Co. and six other banks that received taxpayer bailout funds, demanding bonus information on upper management.

Cuomo asked for a detailed accounting of expected payments to top executives in the ``upcoming bonus season,'' including information on the expected bonus pool for this year, according to a copy of the letters sent today. He requested information on bonuses from before and after the banks knew they would receive funds from the federal Troubled Asset Relief Program.

``In this new era of corporate responsibility we are entering, boards of directors must step up to the plate and prevent wasteful expenditures of corporate funds on outsized executive bonuses and other unjustified compensation,'' Cuomo wrote.

Congressional investigators yesterday demanded that the banks justify billions of dollars in pay and bonuses after they accepted $125 billion as part of the taxpayer-funded bailout.

In letters to the financial institutions, Representative Henry Waxman, a California Democrat and chairman of the House Committee on Oversight and Government Reform, said the banks collectively spent and reserved $108 billion for employee pay and bonuses in the first nine months of 2008, almost the same as last year.

The six other banks are Goldman Sachs Group Inc., Bank of New York Mellon Corp., Merrill Lynch & Co., Morgan Stanley, State Street Corp. and Bank of America Corp. Representatives of the nine firms declined to comment or couldn't immediately be reached for comment.

Management `Interest'

Cuomo told the boards of directors he thought they were in the best position to respond to the requests because top management has a ``significant interest in the size of the bonus pools.'' He said he would have ``grave concerns'' if the expected bonus pool increased because of the receipt of taxpayer funds.

Cuomo requested a description of the bonus pools anticipated for this year, and how they were or will be established, and how, if at all, they changed as a result of accepting the taxpayer funds.

He also requested a description of the bonuses awarded in 2006 and 2007 to employees receiving more than $250,000 in compensation.

Cuomo claims in his letter that certain corporate expenditures and payments by undercapitalized firms may violate the state's debtor-creditor law. He asked the banks today to provide the bonus pool information by Nov. 5.

AIG Steps

American International Group Inc. earlier this month agreed to freeze $19 million due its former chief, a $10 million severance agreement with its outgoing chief financial officer and $600 million in compensation for other executives after Cuomo demanded AIG, once the world's biggest insurer, stop ``extravagant'' expenditures and recover millions of dollars in unreasonable payments or face legal action.

The company also agreed to cancel all junkets and perks. The New York-based insurer submitted to a U.S. takeover last month and has received credit lines from the Federal Reserve of $122.8 billion.

To contact the reporter on this story: Karen Freifeld in New York State Supreme Court at

Last Updated: October 29, 2008 16:34 EDT





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