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AIG bonuses total more than the reported $165 million

The Connecticut attorney general reveals there was at least $218 million in retention pay; $55 million of it went out in December.

March 22, 2009|David G. Savage

WASHINGTON — Connecticut Atty. Gen. Richard Blumenthal caused a stir Saturday by reporting that the bonuses paid to employees of American International Group Inc., the embattled insurance conglomerate, totaled at least $218 million -- well over $50 million more than the tally that set off a national uproar last weekend.

AIG paid out $165 million in retention bonuses on March 15 as part of what it described as a contractual agreement with employees, which was drawn up early last year -- several months before the federal government bailed out the sinking giant.

More than 400 AIG employees received bonuses, with 73 of those getting $1 million or more, Blumenthal's office said.

The difference between the two totals appears to turn on $55 million that was paid in December.

Two weeks ago, in a letter to Treasury Secretary Timothy F. Geithner, AIG's Chief Executive Edward M. Liddy said that the company had paid the $55 million in bonuses in December and that it was obliged to pay $165 million more on March 15.

The latter number set off a furor when it was disclosed last week. It put a harsh spotlight on the Wall Street culture of paying big bonuses even when the companies are reporting huge losses.

In AIG's case, the bonuses were paid to employees of its Financial Products Corp., the same unit that is blamed for causing the losses that drove AIG toward bankruptcy.

President Obama said Monday that he was angered by the news.

"It's hard to understand how derivative traders at AIG warranted any bonuses, much less $165 million in extra pay," he said.

But Treasury officials accepted the view of AIG's chief executive that the payments were made under the terms of a contract and could not be canceled.

In this financial scandal, like others in recent years, state attorneys general have been far more aggressive than federal regulators in pursuing legal actions against companies accused of cheating shareholders and the taxpayers.

Blumenthal and New York's hard-charging Atty. Gen. Andrew Cuomo have challenged the legality of AIG's actions, and they have subpoenaed information from the company.

Blumenthal cited AIG documents on Saturday and said they revealed how "an emergency bailout turned into a meritless handout." He said he was not given the names of employees who received the bonuses.

The Connecticut attorney general also sharply disputed AIG's view that it was legally obliged to pay the bonuses.

"AIG was categorically wrong when it claimed that state labor law compelled payments of these outrageous, unconscionable bonuses," Blumenthal said in a statement.

"A provision in Connecticut law requiring double payment for failure to pay wages does not apply to AIG bonuses," he said, calling it "a joke of a justification to reward financial failure and fiasco."

Last week, Liddy told a House subcommittee that he had urged the AIG bonus recipients to return at least half of any retention payments of $100,000 or more.

On Thursday, the House of Representatives passed a bill that would impose a 90% tax on bonuses that bring an employee's pay above $250,000 in 2009.

The Senate took up a bill to add a 35% tax on the bonuses, but Assistant Minority Leader Jon Kyl (R-Ariz.) blocked a vote, saying lawmakers should not pass "another piece of hastily crafted legislation in this toxic atmosphere."

Senate Majority Leader Harry Reid (D-Nev.) said he would try again to bring a bill this week.

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david.savage@latimes.com

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