AIG Employees to Repay $50 Million in Bonuses
Tuesday, March 24, 2009
The e-mail went out at 6:46 p.m. on Friday.
It had been a brutal week inside AIG Financial Products. News that the firm had doled out more than $165 million in retention payments over the past week had angered the country and sent lawmakers into fits of rage. American International Group's president, Edward M. Liddy, had asked that the unit's employees consider returning some, if not all, of the money. New York Attorney General Andrew M. Cuomo had subpoenaed AIG for a list of Financial Products employees and how much money each had received.
Now, the firm's chief operating officer, Gerry Pasciucco, had set a 5 p.m. Monday deadline for staffers to indicate whether they planned to return their retention payments, and if so, what percentage. His e-mail included what appeared to be a tacit ultimatum from Cuomo.
"We have received assurances from Attorney General Cuomo that no names will be released by his office before he completes a security review which is expected to take at least a week," Pasciucco wrote."To the extent that we meet certain participation targets, it is not expected that the names would be released at all."
Yesterday afternoon, 18 of the 25 most senior Financial Products executives had agreed to return their retention payments, amounting to more than $50 million thus far. Company officials expect more employees to follow suit.
"They are doing the right thing," Cuomo said on a conference call with reporters, adding that he now saw no need to reveal the names.
In addition, AIG issued a news release that said, "We are deeply gratified that a vast majority of FP's senior leadership have expressed a willingness to forsake their recent retention payments."
AIG's efforts to retrieve the payments after last week's outpouring of public indignation marked a dramatic reversal to months of assurances to Financial Products employees that the insurance giant would honor those contracts, according to numerous internal AIG e-mails and memos obtained by The Washington Post.
The retention program at Financial Products was created in March 2008. The unit's longtime president, Joe Cassano, had announced his resignation as it became clear that the housing bubble was collapsing and the firm's now-famous credit-default swaps were going to cost AIG billions of dollars. Company executives planned to keep Financial Products afloat, but they worried that its employees would flee without the promise of financial stability.
"AIG is committed to the future of AIG-FP and is confident about the long term prospects for the business," Bill Dooley, an AIG senior vice president, wrote to Financial Products employees on March 18, 2008. "AIG recognizes that it is important to combine our statements of support for the business with a retention plan that reassures employees regarding their current and future financial prospects with the company. We hope that this plan will encourage all of you to make the same continuing long-term commitment to AIG-FP that AIG is making."
Those promises kept coming -- even as the federal government rescued AIG in September, even as the company decided that Financial Products must be closed down, and even as it hired consulting firms such as McKinsey and BlackRock to work alongside the Federal Reserve to help chart the path ahead.
"The unwinding of FP's complex portfolio will take time to complete and will require the specialized skills and unique knowledge that you have," Dooley wrote to the Financial Products staff on Oct. 3. "I ask that you continue to operate with the same professionalism and grace that you have shown to date. . . . Although many issues remain to be resolved, I can tell you that AIG will live up to its commitment in honoring your retention guarantees."