AIG Chief Asks That Awards Be Returned
Thursday, March 19, 2009
The chief executive of American International Group, trying to quell the wrath of the public and politicians over millions of dollars in bonuses, told Congress yesterday that he had just asked a few hundred employees of the beleaguered insurance company to give back at least half of the extra pay.
Edward M. Liddy, brought in last fall to lead the giant firm the government had just rescued from the brink of insolvency, arrived on Capitol Hill with an understanding of the outrage that has erupted over the bonuses -- but not complete acquiescence.
"We've heard the American people loudly and clearly these past few days," Liddy told an irate House subcommittee, saying that he found the bonuses "distasteful."
But he defended the rationale behind the payments, totaling $165 million to AIG's troubled Financial Products division, reiterating that they were intended to prevent the company from collapsing by deterring vital employees from leaving. He said that "some" of the Financial Products employees have returned their bonuses but did not specify how many. Asked by Rep. Barney Frank (D-Mass.) to provide the names of those who have kept the money, Liddy balked, saying he feared for their safety in light of written threats, including one that said, "All the executives and their families should be executed with piano wire around their necks."
Liddy went before the subcommittee to try to stanch AIG's latest crisis: public anger that has spiraled since the disclosure over the weekend that the company, which has received $170 billion in emergency federal funding, paid scheduled bonuses late last week. The bonuses included more than 70 that were $1 million or more in the division responsible for the company's downfall.
Liddy said he asked Financial Products employees who received at least $100,000 in bonuses to relinquish some of the money. But from the testy mood in the House hearing room, to the White House and the New York attorney general's office, it was plain that AIG's strategy was not containing the crisis.
Rep. Paul E. Kanjorski (D-Pa.), chairman of the House Financial Services subcommittee, scolded the chief executive, saying the decision to go ahead with the bonuses promised in employee contracts could bring down the company -- and ultimately others as well. He said corporations that have received bailout funding are likely to run out of that money soon and will need to ask the government for more.
"Do you realize that the actions that you take at AIG . . . may have jeopardized our ability to get a majority of this Congress to support further largess to provide funds to prevent a recession, depression or meltdown?" Kanjorski asked Liddy.
The House scheduled a vote for today on a measure that would impose an income tax of 90 percent on bonuses that AIG employees received this year. And the Senate Finance Committee is preparing legislation that would capture 90 percent of the bonus money through excise and income taxes. Attorney General Eric H. Holder Jr. announced yesterday that the Justice and Treasury departments are jointly exploring "tools" to recover the money.
Meanwhile, New York Attorney General Andrew M. Cuomo continued to lash out at AIG, saying Liddy's request that employees return part of their bonus money "is simply too little too late."
Cuomo's office said that 418 Financial Products employees have received the bonuses and that 298 of them were paid at least $100,000.
The once-storied division at the center of the storm nearly brought down its corporate parent, the world's largest insurance company, through billions of dollars in losses in its credit default swap business. In that business, the division insured risky mortgage investments by other banks and corporations and considered the insurance premiums its clients paid to be "free money," never expecting those investments to lose value.