Top AIG Execs Giving Back More Than $50M in Bonuses
Pressure from New York Attorney General results in agreement.
March 23, 2009— -- Under intense pressure from New York State Attorney General Andrew Cuomo, top executives from the insurance behemoth AIG have agreed to give back at least $50 million in bonus money from a pool of $165 million the company recently doled out.
Cuomo said today that AIG began to cooperate with his office and "at the end of the day" his office estimates it can "recoup" about $80 million.
"You have done the right thing," Cuomo said he would tell those employees. And he added "I believe the employees have set an example."
At least $30 million of the money AIG employees promised to return, Cuomo said, came from 15 of the top 20 bonus earners who each agreed to give back their total bonus. He said others had not yet been contacted, were considering whether to give back and only a few had outright refused.
"It's a difficult decision," Cuomo said.
In addition, Cuomo said that nine of the top ten earners had agreed to give back their bonus. Of the $165 million bonus pool, about $80 million was awarded to U.S. employees of AIG. Cuomo expressed confidence that he would continue to recoup those dollars.
AIG Responds
"We are deeply gratified that a vast majority of FP's senior leadership have expressed a willingness to forsake their recent retention payments," said AIG spokesperson Christina Pretto.
"We continue to review the responses of our other FP employees and we appreciate Attorney General Cuomo's support. FP employees continue to work professionally and diligently to achieve an orderly wind-down of the FP business, which continues to have some $1.6 trillion of notional derivatives on its books, down about $1 trillion since the beginning of 2008," Pretto said.
"Our legal theory is the fraudulent conveyance theory," Cuomo said when asked how he would approach the issue of recouping the money from bonus recipients who refused his initial demand that they return it.
"If a person returns the money, I don't believe there is a public interest in revealing their name," Cuomo said. "These are people who are doing the right thing," Cuomo said. He noted that in many or most cases they were not involved in the unit that had resulted in AIG's staggering losses.
Cuomo Weighing Whether to Reveal Identities of Those Keeping Their Bonus
Cuomo said his office was still weighing whether the identities of employees who refused to give back their bonuses would be revealed. He said his investigation was ongoing and a security assessment would need to be completed before any such decision was made.
The company has received about $173 billion in public money to stave off collapse and protect the nation's financial system from the catastrophic collateral damage that would have resulted.
Cuomo's office advised Rep. Barney Frank earlier this month that:
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
11 of the individuals who received "retention" bonuses of $1 million or more no longer working at AIG, including one who received $4.6 million.
Click here to read Cuomo's letter on AIG bonuses.
In the months ahead, ABC's Charles Herman has noted that AIG has planned to pay out an additional $230 million in bonuses that is due to be paid for fiscal year 2009, AIG now expects to reduce that amount by at least 30 per cent.
In a press release issued by AIG about two weeks ago the company noted that "AIG has committed to use its best efforts to reduce the amounts AIG owes in respect of 2009. This will be accomplished through voluntary acts such as salary reductions, through negotiations when we sell businesses and through other arrangements over time. We believe that guaranteed payments at AIGFP for 2009 can be reduced by at least 30%."
The release also noted that "to try to cut overall pay, AIG has cut the salary of the 25 highest paid contract employees to $1 salary for 2009. Salaries had ranged up to $500,000, with average salary at $270,000. Salary of other officers cut by 10 per cent."
Bonuses Have Become the Hot Button Issue
Armed with the broad investigative powers of New York's Martin Act, Cuomo subpoenaed the AIG compensation information and initially planned to publicize the top earners. However, when it became apparent that public outrage had triggered as spate of threats to AIG employees, Cuomo decided to reassess his position and has since kept the information private.
The hot button bonus issue is but a part of the staggering alleged abuses of public money that AIG stands accused of by members of Congress. The company also paid out one hundred cents on the dollar to companies who it had insured against the risks of highly complex financial bets.
Treasury officials and particularly Secretary Timothy Geithner have faced questions and criticisms over what they knew of the bonus program and what actions they took, or didn't take, to prevent it.
The Blotter reported last week that the Treasury Department's top watchdog had launched a probe into those and other questions. At a House hearing last Thursday Neil Barofsky, the Special Inspector General for Treasury's Troubled Asset Relief Program, announced he was launching an audit to examine who in the Federal government "knew what, how, when and why" about AIG's bonus program, Barofsky said. He will also scrutinize AIG's employment contracts, and look at how government officials monitored and enforced executive compensation at bailed-out companies.