Andrew Cuomo is on the AIG bonus case. And he’s loving it.
Full letter to Barney Frank below. Some highlights:
AIG now claims that it had no choice but to pay these sums because of the unalterable
terms of the plan. However, had the federal government not bailed out AIG with billions in taxpayer funds, the firm likely would have gone bankrupt, and surely no payments would have been made out of the plan. My Office has reviewed the legal opinion that AIG obtained from its
own counsel, and it is not at all clear that these lawyers even considered the argument that it is
only by the grace of American taxpayers that members of Financial Products even have jobs, let alone a pool of retention bonus money. I hope the Committee will take up this issue at its
Furthermore, we know that AIG was able to bargain with its Financial Products
employees since these employees have agreed to take salaries of $1 for 2009 in exchange for
receiving their retention bonus packages. The fact that AIG engaged in this negotiation flies in the face of AIG’s assertion that it had no choice but to make these lavish multi-million dollar
bonus payments. It appears that AIG had far more leverage than they now claim.
AIG also claims that retention of individuals at Financial Products was vital to unwinding
the subsidiary’s business. However, to date, AIG has been unwilling to disclose the names of
those who received these retention payments making it impossible to test their claim. Moreover,
as detailed below, numerous individuals who received large “retention” bonuses are no longer at the firm. Until we obtain the names of these individuals, it is impossible to determine when and
why they left the firm and how it is that they received these payments.
If AIG were confident in its claim that those who received these large bonuses were so
vital to the orderly unwinding of the unit, one would expect them to freely provide the names
and positions of those who got these bonuses. My Office will continue to seek an explanation
for why each one of these individuals was so crucial to keep aboard that they were paid
handsomely despite the unit’s disastrous performance…
Already my Office has determined that some of these bonuses were staggering in size. For example:
• The top recipient received more than $6.4 million;
• The top seven bonus recipients received more than $4 million each;
• The top 10 bonus recipients received a combined $42 million;
• 22 individuals received bonuses of $2 million or more, and combined they
received more than $72 million;
• 73 individuals received bonuses of $1 million or more; and
• Eleven of the individuals who received “retention” bonuses of $1 million or more are no longer working at AIG, including one who received $4.6 million;
Again, these payments were all made to individuals in the subsidiary whose performance
led to crushing losses and the near failure of AIG. Thus, last week, AIG made more than 73
millionaires in the unit which lost so much money that it brought the firm to its knees, forcing ~
taxpayer bailout. Something is deeply wrong with this outcome. I hope the Committee will
address it head on.
We have also now obtained the contracts under which AIG decided to make these
payments. The contracts shockingly contain a provision that required most individuals’ bonuses to be 100% of their 2007 bonuses. Thus, in the Spring of last year, AIG chose to lock in bonuses for 2008 at 2007 levels despite obvious signs that 2008 performance would be disastrous in comparison to the year before. My Office has thus begun to closely examine the circumstances under which the plan was created.