Halt Comes as New York Attorney General Reviews Insurer’s Actions Before Rescue
NEW YORK — American International Group Inc. agreed Wednesday to freeze some $19 million in payments to its former chief executive, Martin Sullivan, while New York Attorney General Andrew Cuomo reviews executive compensation and other expenditures paid out as the company neared collapse earlier this year.
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The insurance giant also has agreed not to distribute any funds from its $600 million deferred-compensation and bonus pools of its AIG Financial Products subsidiary, which Mr. Cuomo has said was largely responsible for the company’s near collapse.
The company recently received credit lines of up to $122.8 billion from the federal government, helping it avoid collapse. Last week, AIG had tapped $82.9 billion of those credit lines. Some regulators, including Mr. Cuomo, are troubled by outsized compensation packages being paid to departing executives in the financial industry, particularly if those firms have sought help from the federal government.
“To be clear, it is my position that until the taxpayers are repaid with interest the more than $120 billion that has been used in the rescue financing of AIG, no funds should be paid out of these pools to any executives,” Mr. Cuomo said in a letter Wednesday to Edward M. Liddy, AIG’s chief executive. “As AIG recovers using taxpayer money, these pools should not be used to reward executives ahead of taxpayers.”
The attorney general and AIG agreed last week to work together to recover any expenditures deemed to be improper as the company neared collapse earlier this year, including payments to former executives. His investigation into AIG is continuing.
On Wednesday, Peter Tulupman, an AIG spokesman, confirmed the company had received the letter. “It is consistent with our discussions with the attorney general and with the actions we have taken,” Mr. Tulupman said.
The company also agreed to establish a special governance committee to institute new expense-management controls and to immediately cancel all junkets or perks that aren’t strictly justified by legitimate business needs. As a result, AIG will be canceling more than 160 conferences and events for a total savings of more than $8 million.
Members of Congress expressed outrage earlier this month at a different AIG expenditure: more than $440,000 for a California spa outing for top business producers just days after AIG’s government-funded rescue.
“Once a company accepts tax dollars, there are different rules,” Mr. Cuomo said.
During a conference call with reporters, Mr. Cuomo said Mr. Sullivan was still owed about $19 million plus other benefits under his employment contract. Mr. Sullivan was forced out by the company’s board in June. Calls to Mr. Sullivan and his lawyer weren’t returned.
Mr. Cuomo said that Joseph Cassano, the former head of AIG Financial Products, has a share of about $69 million in the deferred-compensation and bonus pool and five other top executives in that unit have a combined share of funds totaling about $93 million. Those payments have been frozen, the attorney general said.
Mr. Cuomo has said he believes some company expenditures as it neared collapse as well as payments to departing executives may violate New York state law and are fraudulent conveyances.
Write to Chad Bray at [email protected]
OCTOBER 23, 2008
By CHAD BRAY
Source: The Wall Street Journal