Bank of America deploys 'Ice cream defence' against Cuomo

Losses and Lawsuits

NEW YORK - Bank of America's lawyers have sought the 'ice cream defence' to rebuff a subpoena filed by New York attorney-general Andrew Cuomo to force them to disclose the bonus structure of Merrill Lynch, which Bank of America bought on January 1. Cuomo has called for the release of pay data for the top 200 employees. Bank of America says this data is akin to a trade secret and is calling on the defence used by Carvel's ice cream to prevent it divulging its secret recipe in a 1979 New York lawsuit.

Cuomo's lawyers countered by saying compensation structures have never been trade secrets and are common currency between rival investment banks and recruitment companies.

Cuomo has alleged Merrill Lynch misled Congress about the timing of the bonuses, paid out only days before the finalisation of the Bank of America buyout first agreed in September 2008. Merrill paid out $4 billion in early year-end bonuses in December 2008, contributing to buyer Bank of America's decision to seek $20 billion of US Treasury funding in January 2009 (see OpRisk & Compliance, February 2009). US political and regulatory ire was further stoked by revelations that former Merrill chief executive officer John Thain had spent over $1 million to refurbish his office.

Cuomo has already said he will also subpoena state bailout recipient insurer American International Group after it announced $165 million in fresh executive bonuses. AIG has received a total of $180 billion in state aid since it first teetered on the brink of collapse in 2008.