Attorneys General's Probes Reveal AIG's Boundless Greed

by Pythiian1 | March 22, 2009 at 08:49 am

692 views | 76 Recommendations | 27 comments

In light of the fact that Wall Street, over the years, has a habit of paying big bonuses even when the companies are reporting large losses.

By the same token, in the recent years, state attorneys general have been far more aggressive and successful than federal regulators in pursuing legal actions against companies accused of cheating shareholders and taxpayers.

The spotlight is currently focusing on AIG's case because bonuses were paid to employees in the Financial Products unit. It is the same unit that caused the losses that drove AIG toward bankruptcy. This writer had previously reported on this aspect about AIG.

New York Attorney General (AG) Andrew Cuomo has prevailed when his office subpoenaed AIG to provide the names of those bonuses' recipients, which has opened a floodgate for other Attorneys General across the country to subpoena for information.

On Saturday, like AG Cuomo, Connecticut Attorney General (AG), Richard Blumenthal has challenged the legality of AIG's actions as he too, subpoenaed information from the company.

Attorney General Blumenthal also revealed that the bonuses paid to AIG employees are actually a total of $218 million rather than the $165 million as reported by AIG, which set off a national uproar over the past week. The difference between the two totals is $55 million.

The total amount of bonuses paid to employees of the embattled insurance giant AIG was $218 million, more than $50 million higher than has widely been reported in the media, Attorney General Richard Blumenthal said. More than 400 AIG employees received bonuses — starting at $1,000 and ranging up to the $6.4 million reportedly paid to an executive who lives in a mansion in Fairfield, Connecticut.

An AIG spokesperson said that Attorney General Blumenthal is wrong to have included the December 2008 bonuses because technically, it represents last year's bonuses.

"The payments he appears to be referring to were made months ago, have been widely reported on and were specifically disclosed to the Treasury," spokesman Mark Herr said, adding that the $165 million in "retention payments" to executives of the Financial Products unit were made in March.

AG Blumenthal has countered with the argument that it is about the actual sum of bonus payments made from taxpayers' money instead of a monthly or yearly breakdown. Further, he believes his numbers are correct.

"We've not only added the numbers, but the company has given us documents that have the number at $218 million," Blumenthal said. "Some of that total is from earlier bonuses, but the main point is all of it seems to be out of taxpayer funds. ... Whether the payments were made in December or March seems to be beside the point. The total that was disclosed so far was $165 million." Blumenthal added that his new numbers are correct. "There's certainly no double-counting," he said in an interview from his office Saturday

It is noteworthy that AIG has been bailed out by taxpayers four times to the tune of $173 billion. Yet, AIG is pursuing a suit against the United States government and the people to retrieve additional monies owed to the company. NP Karen Hatter previously reported this story.

A.I.G. is effectively suing its majority owner, the U.S. government, which has an 80 percent stake in the insurer. The company is in effect asking for even more money, in the form of tax refunds. The suit also suggests that A.I.G. is spending taxpayer money to pursue its case, something it is legally entitled to do. Its initial claim was denied by the Internal Revenue Service last year.

The lawsuit, filed Feb. 27, 2009, in U.S. District Court in Manhattan, details, among other things, certain tax-related dealings of the financial products unit, the once high-flying division that has been singled out for its role in A.I.G.’s financial crisis last autumn.

Amid the public furor, the AIG executives in Connecticut continue to believe that they deserve their payments and have filed a suit against the government to obtain their 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."

In addition, Attorneys General from 21 other states have filed subpoenas to obtain names from a plethora of AIG offices in their own states.

New Jersey Attorney General Anne Milgram said she sent a letter to AIG Chief Executive Officer Edward Liddy demanding a list of employees in the AIG Financial Products unit who received bonuses since September. Milgram said in a statement that she asked AIG to send her the information about bonus recipients and copies of their employment contracts within five days. She was joined in the request by Arizona, Delaware, Illinois, Kentucky, Louisiana, Maine, Michigan, Mississippi, Montana, Nebraska, New Mexico, Ohio, Oklahoma, Oregon, Pennsylvania, Texas, Washington and West Virginia.

Related Articles about Attorney General and AIG by this Writer:

Pythiian1: NY Attorney General Cuomo Revealed Details of AIG Bonuses
President Obama & NY Attorney General Cuomo Outraged by AIG

A Partial List by Other NP Writers:

Karen Hatter: American International Group (AIG) Sues U.S. for $306MTax Refunds
Jordan: Outrage Spreads over AIG Payouts "Too Big to Fail"

AIG CEO Requests Execs Give Back Half of Bonuses

Esta: Treasury pressure is on, AIG top 25 to receive $1.00 for 2009

-------------
TARP Related Articles by this Writer:

0 See all footage | View Slideshow

Share: email story | add to any | Digg | facebook | stumbleupon

recommend This comment thread is now closed

Karen Hatter

at 11:56 on March 22nd, 2009

Excellent coverage as always, Pythiian1.

Pythiian1

at 12:06 on March 22nd, 2009

Thank you so much, Karen, for stopping by, reading and recommending my piece.

The story of AIG is like an endless discovery of massive abuses as it is an insurance company, its financial tentacles are far reaching around the world, not just only in the United States.

Roy C

at 12:23 on March 22nd, 2009

Obama signed the bill after his Sec of the Treas lobbied to get the bonuses back in. According to Sen Dodd, Dodd had written them out of the bill, and, when the bill was in committee to reconcile the house version with the senate version, Geithner lobbied to get the bonuses back in.

We can talk about greed and we should, but we have to talk about political incompetence as well because, apparently, Obama didn't read the bill and/or no one told him about the bonuses.

Someone is in trouble here, and both Eleanor Clift of Newsweek and Maureen Dowd of the New York Times, both big libs and supporters of the Obama presidency, are not happy with Obama's performance here.

Eleanor Clift says:

"Who would have thought 55 days into this administration we would be asking the question, what did he know and when did he know it?

Word that a provision in the stimulus bill gave the green light for AIG to hand out bonuses using taxpayer money sent the media bloodhounds hot on the trail of whoever is the culprit. For a time, it looked like Senate Banking chairman Chris Dodd would take the fall, but after 24 hours of twisting in the wind, Dodd said the change that exempted past agreements to pay bonuses was made at the request of the administration.

President Obama likes to remind voters that he inherited a mess, and that's true, but this one is of his own making. And until he comes up with a satisfactory explanation of who did what when, and why, his credibility will suffer."

Maureen Dowd says:

"His lofty team of economic rivals is looking more like a team of small forwards and shooting guards. At the White House on Monday, the president read reporters some tough talk from the teleprompter about the chuckleheads at A.I.G., accusing them of “recklessness and greed.”

But it was his own boiled carrots who acted shocked at bonuses that they should have known were coming, and should have dismantled before handing A.I.G. another $30 billion two weeks ago. It is bad enough that the billions are being laundered through A.I.G. to the likes of bailout double-dippers Goldman Sachs, Citigroup and Bank of America, not to mention foreign banks."

amyjudd

at 12:37 on March 22nd, 2009

These people just get worse and worse - thanks for the update

Pythiian1

at 12:53 on March 22nd, 2009

Thank you so much, Amy, for your read, comments, and recommendation. Thank you for your interest.

The story as it enfolds is getting worse because it appears that AIG has been duplicitous in reporting all of its bonus-payments across the country since AIG first came to Bush administration for a bail-out, which it had received the TARP funds quite handsomely since last year. I wonder if AIG had received a good chunk of the Bush administration overpayment of $78 Billion to banks and companies last year.

Roy C

at 12:39 on March 22nd, 2009

Which "people", AIG or the Obama admin's handling of it?

Roy C

at 13:46 on March 22nd, 2009

The payments may not be illegal, especially since Obama legalized them, Pythiian. On what basis would a state government say that such a payment was illegal?

How about more research here?

Roy C

at 14:22 on March 22nd, 2009

Looking at the Dodd interview, it appears that the payments are legal, were desired by Geithner, but that the bonuses can be recalled by using the language Dodd put into the bill.

eastvanray

at 14:28 on March 22nd, 2009

Brutal incompetence! These Obama administration idiots (including Obama himself) are trying to close the barn door after all the horses have already fled. Why didn't they get this straight BEFORE sending out all that taxpayer money?

Roy C

at 14:42 on March 22nd, 2009

Exactly. And they may have made the whole bonus thing legal, as well.

Pythiian1

at 14:29 on March 22nd, 2009

Be fair. NowPublic is a community where ad hominem attacks, insults and threats are not tolerated. Discourse should remain civil and focus on the ideas being presented rather than the individuals expressing them.

Look, roy c, I don't mind your comments. Do Not Personalize your Attacks at me and my works.

If you are that unhappy and angry, by all means, post your own piece.

Tina Kells

at 14:52 on March 22nd, 2009

Thank you for drawing attention to the TOC here. Please debate the issues presented in the story without the personal attacks on the author's character (aka "guts").

Roy C

at 15:05 on March 22nd, 2009

I didn't raise the issue until I was attacked, Tina. I didn't do anything wrong but add vital information to the story, i.e., are the payments, in fact, illegal, when they were put into the bill Obama signed at the Sec of Treasury's request.

Pythiian1

at 16:44 on March 22nd, 2009

Thank you to everyone who have recommended this piece, I appreciate your interests and supports.

Roy C

at 14:41 on March 22nd, 2009

Pythiian, my criticism is of your story. Please have enough guts to realize that your story could use a little pertinent questioning.

I would say that your attitude was an attack on my legitimate questioning. I have no questions about your character. I have questions as to whether the attorneys general are not just grandstanding by going after an immoral act that is not at all illegal.

The people who got these bonuses should give them back, but they should not be considered felons if there is no law that has been broken.

If you don't want legitimate questioning of a story you post, just post it at a blog.

Mikasi

at 15:00 on March 22nd, 2009

I speak from ignorance here, not having had time to read the story or other comments but picking up on your comment alone, Roy C.

It is important here to people may well tolerate incredibly illegal acts while choosing to go whole hog nuts due to a perfectly legal though immoral act.

On April 15th conservatives across this nation will be gathering for a Tax Day Tea Party. At this moment it is worth remembering that the tea taxes levied by the British were completely and totally legal while being egrigiously immoral.

It was the immorality that brought us a new nation... and might in the next 2 years at this rate get us another.

Roy C

at 14:34 on March 22nd, 2009

Further, I am very happy, and enjoy the challenge of finding evidence to support various points of view. I am not angry at all. I have enjoyed this thoroughly.

Pythiian1

at 16:56 on March 22nd, 2009

If you read the article as the sources are provided, do feel free to attack the newspaper and the Attorney General Blumenthal. I am reporting the news, in case you haven't noticed all the sources. Do read them.

Do Not, once again, talk about my "not having enough guts" because in English, it means a personal attack of another person, whom you do not know.

As I have always mentioned, post your own pieces and explore your ideas there.

QueensHart

at 15:16 on March 22nd, 2009

I don't think that was a personal attack. I've read all the posts and I think you Pythiian attacked Roy first. The issue is : are the payments legal? If the payments are legal then the story is different. If the payments are legal the story is about persecution not prosecution. For me I think that information was essential to the story! It doesn't change your story it changes how we see the attorney general of New York. Without this other information, the story is incomplete

When new information comes in that is relevant it needs to be added. Otherwise we don't get at the truth. We get enough of this distortion in the news and here with different perspectives we have the chance to get balance....to get at the truth.

QueensHart

at 17:19 on March 22nd, 2009

tikun

at 15:26 on March 22nd, 2009

This whole blame game regarding the incompetence of both administrations is horrendous. AIG was once the most successful international insurance company in the world. It got tainted not by their right as a public company to give bonuses, before the govt. monies were given to them, but by the lack of interest by the previous administration to enforce the guidelines for banking procedures. But it does not end there. Thanks to Barney Frank and his "ex-lover" who was a big honcho at freddie Barney Frank pushed hard for an easing of the requirements to receive and give loans. There were also racial-discrimination accusations made to some members of congress when they opposed the legislation.

The corruption by both administrations and the arrogance of the present one leaves little room for healing or change.

Now that AIG has been given/taken monies from the public coffers it is their responsibility to the taxpayers not to exploit the loopholes. However, the rhetoric from the administration in order to spin the story away from the incompetence is scary and dangerous.

Roy brings up some very good questions concerning the players in this mess and I believe that they are worth a serious look.

Until this government stops using "crisis" as a means to pay back their "old-boy" network with oppressive and anti-democratic laws proposed we are all in for some serious and dangerous erosion of our rights.

There have been men/women before president Obama that havecome on the national scene that also spoke with a silver tongue and were bright as anyone could have hoped for but led us down the path not to "heaven on earth" but to the grapes of wrath.

Roy C

at 15:24 on March 22nd, 2009

Here is Judge Napolitano of FoxNews saying that the actions of the AG of New York are illegal:

Judge Napolitano Rule: AIG, Mob Rule, and the Constitution!

You cannot just ask for the names of the people who got the bonuses. That is illegal. Where is the crime?

Judge Napolitano: the judge will quash the subpoenas behind this investigation.

tikun

at 15:32 on March 22nd, 2009

With the present administration calling for blood and asking that the names be made public is irresponsible and dangerous. It is nothing more than a spin and a childish tactic that will get people hurt. Creating phony legislation that will never pass muster because of its punitive nature is nothing more then politics as usual. Wheres the beef/change?

Roy C

at 15:35 on March 22nd, 2009

Taxing something ex post facto is probably illegal. You can't tax something after it has been paid at a new rate. That is what I will bet.

The whole thing stinks. The Obama administration has shot itself in the foot with this one.

Tamiya

at 16:01 on March 22nd, 2009

In all this mess, I find few things to be quite interesting:

(1) Where were all these politicians when the initial bail out agreement was given to AIG that had the clauses to allow bonuses? I believe they were still in the office.

(2) Why a guy just hired 6 months ago is getting grilled for all the chaos?

(3) Is it fair for the same politicians to accept large sums of money for political campaigns from AIG within last one year?

The bonuses are a disgrace; however, how it came to this just did not happen overnight or without the help of many of the politicians questioning AIG.

And above all, now the AIG using the part of the Taxpayers bail out money to sue Taxpayers.