March 17, 2009 -- The Financial Products Subsidiary may be largely to blame for the near collapse of insurance giant AIG last year, but that did not stop seven executives at that department from taking home bonuses of over $4 million each, with the top bonus recipient earning more than $6.4 million, according to numbers released today by New York Attorney General Andrew Cuomo in a letter to the Chairman of the House Financial Services Committee Barney Frank (D-Mass.).
"Already my Office has determined that some of these bonuses were staggering in size," wrote Cuomo after he subpoenaed AIG Monday demanding the names and job descriptions of those that shared a $165 million bonus pool despite the firm's dismal performance and its acceptance of over $170 billion in bailout funds so far.
Click here to read Cuomo's letter on AIG bonuses.
"Again, these payments were all made to individuals in the subsidiary whose performance led to crushing losses and the near failure of AIG," wrote Cuomo. "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 a taxpayer bailout."
He provided the numbers collected thus far by his office.
The top recipient received more than $6.4 million;
The top ten bonus recipients received a combined $42 million;
22 individuals received bonuses of $2 million or more, and combined they received more than $72 million;
73 individuals received bonuses of $1 million or more; and
Eleven of the individuals who received "retention" bonuses of $1 million or more are no longer working at AIG, including one who received $4.6 million.
The CEO of AIG, Edward Liddy, has said the company's "hands are tied" when it came to awarding the bonuses because contractual obligations made it legally necessary to award them. But Cuomo insists that the company could have worked around those obligations.
"My Office has reviewed the legal opinion that AIG obtained from its own counsel, and it is not at all clear that these lawyers even considered the argument that is it only by the grace of American taxpayers that members of Financial Products even have jobs, let alone a pool of retention bonus money," wrote Cuomo urging Frank to take up the issue at Wednesday's hearing on Capitol Hill.
Cuomo also argues that AIG could have negotiated with its employees since their salaries were renegotiated for 2009 in exchange for receiving their retention bonuses.
"The fact that AIG engaged in this negotiation flies in the face of AIG's assertion that it had no choice but to make these lavish multi-million dollar bonus payments," said Cuomo. "It appears that AIG had far more leverage than they now claim."
The War Over Executive Compensation
Cuomo has led the crusade against bailed-out companies continued use of bonuses since last fall. He has said he is investigating all of AIG's finances back to January 2007.
Cuomo is also seeking the names and compensation information of those at Merrill Lynch who received bonuses shortly before the firm merged with Bank of America. In that case, Cuomo has accused Bank of America of undermining his authority, interfering with his investigation and attempting to influence the government's witnesses, according to court documents.
Bank of America has argued that releasing the names and numbers to the public would be detrimental to the company.
"Bank of America has cooperated with the attorney general's investigation into Merrill Lynch bonuses and will continue to do so," spokesman Scott Silvestri said in a statement. "Regarding the bonus information requested, Bank of America has continually offered to provide that information subject to reasonable confidentiality."
Cuomo's office said that the bank has not demonstrated that it had ever "treated the information in a confidential manner."
A ruling is expected later this week on whether or not the company will have to turn over the information.