NY AG: 73 Persons At AIG Received Bonuses Of $1 Million Or More
March 17 2009 - 1:59PM
Dow Jones News
New York Attorney General Andrew Cuomo said Tuesday that
American International Group Inc. (AIG) granted retention bonuses
of $1 million or more to 73 people in its AIG Financial Products
subsidiary, including 11 persons who no longer work at the
company.
In a letter to House Financial Services Committee Chairman
Barney Frank on Tuesday, Cuomo said the top ten bonus recipients
combined received $42 million, with the top recipient getting more
than $6.4 million.
Cuomo has blamed the unit for the insurer's near collapse last
year. The attorney general said 11 persons who have left the
company received retention bonuses of $1 million or more, with one
person getting more than $4.6 million.
"Again, these payments were all made to individuals in the
subsidiary whose performance led to crushing losses and the near
failure of AIG," Cuomo said in the letter. "Thus, last week, AIG
made more than 73 millionaires in the unit which lost so much money
that it brought the firm to its knees, forcing taxpayer bailout.
Something is deeply wrong with this outcome."
Frank, D-Mass., is expected to hold a hearing on the AIG bonuses
on Wednesday.
On Monday, Cuomo subpoenaed AIG seeking details on who received
retention bonuses in the financial products unit and copies of the
contracts underlying the bonuses. In his letter, Cuomo said AIG has
refused to provide the names of those who received bonuses.
Over the weekend, news surfaced that AIG had paid $165 million
in retention bonuses to individuals in the financial products unit.
The $165 million is the latest installment of a retention program
that is slated to pay he unit's employees about $450 million. AIG
had previously paid out $55 million, and an additional $230 million
is pending for 2009.
AIG has claimed its contractually obligated to pay the bonuses,
which were negotiated in the first quarter of 2008, and will make
efforts to reduce the retention payments by at least 30% in
2009.
The insurer has accepted more than $170 billion in U.S.
government funding, and government officials have said they may
have to pump more money into the insurer if the economy continues
to worsen. Earlier this month, it reported a $61.7 billion
fourth-quarter loss.
In his letter Tuesday, Cuomo said the contracts his office has
reviewed contained a provision that required most individuals'
bonuses to be 100% of their 2007 bonuses.
"Thus, in the spring of last year, AIG chose to lock in bonuses
for 2008 at 2007 levels despite obvious signs that 2008 performance
would be disastrous in comparison to the year before," Cuomo said.
"My office has thus begun to closely examine the circumstances
under which the plan was created."
-By Chad Bray, Dow Jones Newswires; 212-227-2017;
chad.bray@dowjones.com