AIG Will Freeze Some Pay to Former Execs
October 22, 2008Financially troubled American International Group, now supported by a federal bailout, has agreed to freeze millions of dollars in compensation and bonuses for former executives.
In a letter Wednesday to AIG's new chairman, Edward Liddy, New York Attorney General Andrew Cuomo wrote that after his office's review of company documents, the insurance and finance giant agreed to stop payments under former chief executive Martin Sullivan's $19 million pay package.
AIG also confirmed that no payments will be made from the $600 million compensation and bonus pools of its Financial Products subsidiary, including $69 million the former head of the subsidiary, Joseph Casano, could have been paid and about $93 million that five other top executives might have been eligible to receive.
"The Financial Products subsidiary was largely responsible for AIG's collapse, and Casano has been terminated," Cuomo wrote. Taxpayers' financial interests should take priority over those managers, he said.
Company spokesman Joe Norton said Cuomo's letter was consistent with AIG's actions and discussions with the attorney general. After a meeting last week, Liddy and Cuomo issued a joint statement that payments to outgoing chief financial officer Steven Bensinger were stopped and the company would help Cuomo recover any illegal expenditures.
Cuomo said Wednesday that the next step for his office will be investigating how to recoup executive bonuses paid previously, saying a fraud law could apply depending on timing, circumstances and contracts. Handling AIG's case should be regarded as a template for other companies that require government help, he said.
"Taxpayers are, in many ways, now like shareholders of your company, and the new AIG has a responsibility to them in the first instance," Cuomo wrote Liddy, noting the $120 billion bailout will leave the U.S. Treasury holding AIG stock.
"We're looking at a number of companies which we don't wish to share at this point," Cuomo said. "You're going to have this same issue with many other companies."
He criticized excessive leveraging, poor regulation and executive compensation packages that gave incentives for short-term gains at the expense of long-term, sustainable growth.
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