Inside AIG-FP, Feeling the Public's Wrath

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Protests Outside AIG Building

Protesters chanted and marched against corporate excess and executive bonuses in front of the AIG building in Washington on Thursday, as Congress worked to pass a bill taxing such bonuses.

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In actuality, he said, nearly all the troublesome sectors of the business -- namely, the risky credit derivatives written on mortgage-backed securities -- are now out of the equation, as are the people who worked on them. That leaves a small number of employees to untangle the remaining trades in four main areas: commodities, interest rates, currency and equities -- most of which were fully hedged and have caused little problem. The effort also requires a sizable number of "back office" staff, such as systems, computing, accounting, human resources and legal teams.

"Everybody, including my secretary and including the guy down the hall that serves lunch, gets a payment," said Pasciucco, who added that he received no retention payment and has no contract.

But what about the argument made by top AIG officials that the people receiving retention bonuses have unique skills and knowledge that make them indispensable?

"They are replaceable," Pasciucco acknowledges. "If we were running a long-term business, we could probably replace them over time, not all at the same time."

But it would be impractical at best, dangerous at worst, to get rid of everyone at Financial Products, according to AIG officials. If everyone leaves, Pasciucco said, "you don't have people that really, truly understand the book [of business]. We're still big enough that that matters."

If they did walk out the door, who would volunteer to work at the Chernobyl of the financial world? And what would become of the mammoth portfolio that remains?

"It would become the biggest naked position on Wall Street," one longtime Financial Products executive said, "and everybody would exploit it."

Before he waded into the circus on Capitol Hill on Wednesday, Liddy e-mailed a letter to the employees of Financial Products, asking them to "step up and do the right thing." He asked that anyone who received more than $100,000 in retention payments return at least 50 percent.

The Financial Products staff met twice Wednesday inside one of the firm's large, glass-walled conference rooms to discuss the boss's letter. Numerous employees indicated that they would be willing to return the money, but most wanted nothing more to do with the firm. It was a preview of the possible exodus to come, one that concerns Liddy himself.

"My fear is that the damage is done," he told a congressional subcommittee. "That they will return [the money], but that they will return it with their resignations."

There is little doubt within Financial Products that he's right about that.

"Nobody is going to give it back and then stay," said one of the firm's employees. "If they give back the money, then they will walk. And they will walk into the arms of AIG's counterparties."

In the meantime, the e-mails from the public have continued to roll in, including death threats and calls to blow up the firm's Wilton headquarters. Reporters and photographers have camped out in front of the offices in London and Connecticut. They have staked out employees' houses. The New York Post identified one executive and labeled him "Jackpot Jimmy." Another employee had to relocate his family after a London tabloid printed his address. A protest group is organizing an "AIG magical mystery tour" Saturday, loading up a 47-seat bus to stop at Financial Products and at the homes of some of its executives.

"People are really upset. Everybody's calling them," one Financial Products employee said. "College roommates are calling. In-laws, relatives, cousins nobody has heard from. Because people are reading this around the world and saying: 'Oh, my God, you work for that place?' "