Six days after the government rescued AIG aig with an $85 billion loan, the insurance company spent $443,000 on a week-long event for agents at a California resort, according to invoices produced during a congressional hearing Tuesday.
"Average Americans are suffering economically," said Rep. Henry Waxman, D-Calif., chairman of the House Committee on Oversight and Government Reform, which held the hearing. "Yet less than a week after the taxpayers rescued AIG, company executives could be found wining and dining at one of the most exclusive resorts in the nation."
Testifying at the hearing, Robert Willumstad, AIG's chief executive before the government took over the company last month, said he did not know about the event. "I was not aware of it, and if I had been, I would not have let it happen."
According to records the committee obtained, the event's expenses included nearly $200,000 for rooms, about $150,000 for banquets and $23,000 for spa services.
In testimony, Willumstad and Martin Sullivan, his predecessor who headed AIG from 2005 until July, avoided taking responsibility for its collapse.
Although Willumstad refused the $22 million severance package the company offered him at his departure, he testified, "I don't believe AIG could have done anything differently."
Martin said, "At the time I left the company, I thought it was well capitalized and had liquidity."
Willumstad and Sullivan said the company was hurt by "mark-to-market" accounting rules that forced the company to write down the value of its credit default swaps by tens of billions of dollars, requiring AIG to raise more capital.
Although AIG's insurance businesses remain healthy, the company's crisis accelerated last month because of its sales of insurancelike securities known as credit default swaps, which buyers of mortgage-backed securities bought to protect themselves against defaults. As defaults increased in mortgage-backed securities, AIG's credit rating dropped, and that forced it to raise billions of dollars in additional collateral.
Former CEO Maurice Greenberg, who headed AIG for more than 35 years until his retirement in 2005, said in a written statement to the committee that risk controls his team put in place were weakened or eliminated after his retirement.
Also during the hearing, the House committee revealed that Joseph Cassano, the head of the finance division largely responsible for AIG's $5 billion loss in the last quarter of 2007, was allowed to keep up to $34 million in unvested bonuses and placed on a $1 million-a-month consulting retainer when he left AIG in February.
AIG spokesman Joe Norton said only seven to 10 AIG executives attended last month's California gathering, a reward for the top-producing AIG independent life insurance agents and guests.
"It is common practice in the industry and is viewed as an expected part of the higher-performing agents' compensation," Norton said.
He also said AIG's consulting contract with Cassano ended by mutual agreement on Monday.