NEW YORK (Reuters) - New York Attorney General Andrew Cuomo, who negotiated executive payment clawbacks by American International Group Inc (AIG.N) as it received a taxpayer bailout, warned nine banks receiving government money on Wednesday that using the funds for bonus payments may be illegal under state law.
In a letter sent to Bank of America Corp (BAC.N), Bank of New York Mellon Corp (BK.N), Citigroup Inc (C.N), Goldman Sachs Group Inc (GS.N), JPMorgan Chase & Co (JPM.N), Merrill Lynch & Co Inc MER.N, Morgan Stanley (MS.N), State Street Corp (STT.N) and Wells Fargo & Co (WFC.N), he also asked their boards to explain what mechanisms they have put in place to protect taxpayer money.
“Specifically, corporate expenditures and payments, made in the absence of fair consideration of undercapitalized firms, may well violate NY Debtor and Creditor Law 274, which deems such payments illegal fraudulent conveyances,” Cuomo’s letter said.
Representatives of Bank of America, Goldman Sachs and Morgan Stanley declined comment. Representatives of Merrill, JPMorgan, Citigroup, Wells Fargo, State Street and Bank of New York Mellon were not immediately available to comment.
The letter said that “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 the Troubled Asset Relief Program.”
Cuomo asked the banks to provide the information by November 5.
Earlier this month, AIG promised to recover executive payments and other compensation, cancel perks and institute reforms after Cuomo threatened legal action over its controversial spending.
“Cuomo demands detailed information regarding bonus pool allocations from the boards of directors of the nine banks,” his office said in a statement accompanying copies of the letters.
Cuomo objected to “extravagant” payments to AIG executives who ran the company into near-collapse, including a $5 million cash bonus and $15 million “golden parachute” to former CEO Martin Sullivan earlier this year.
A $34 million bonus was also designated for the former head of the AIG Financial Products Unit, Joseph Cassano, whose unit generated the bulk of the firm’s losses.
Reporting by Grant McCool; Editing by Andre Grenon