Crook Alert!! AIG Paying $165 Million Bonuses and $52 Billion to Counterparties with Taxpayers' Money

Obama: Apply the Heimlich Maneuver to AIG Execs

AIG Hogs Waiting for Taxpayer Corn

Gordon Gekko, "Greed is good."
Gordon Gekko, "Greed is good."

AIG Paying $100 Million Bonuses With Taxpayers' Money 3-13-09 Edmund L. Andrews and Peter Baker in the NY Times

The NY Times reported today that American International Group (AIG) announced that it is paying $100 million in executive bonuses in part to the executives in the firm's London office who were responsible for creating the toxic, credit default swaps that brought about the collapse of the AIG house of cards. AIG's CEO declined a request from Secretary of the Treasury Geithner to reconsider, saying

On the one hand, all of us at A.I.G. recognize the environment in which we operate and the remonstrations of our President for a more restrained system of compensation for executives. On the other hand, we cannot attract and retain the best and brightest talent to lead and staff the AIG businesses — which are now being operated principally on behalf of the American taxpayers — if employees believe that their compensation is subject to continued and arbitrary adjustment by the U.S. Treasury."

AIG CEO Liddy said he had been advised by lawyers that the company was legally required to pay the bonuses because they had been agreed to before the government bailout occurred.

Comment: I wonder why contracts with AIG executives are binding because they were negotiated months before the bailout while auto workers are expected to rescind health care insurance and pension contracts negotiated years ago, as the price of government support to avoid bankruptcy??? Something is rotten in Denmark!

This action by AIG is sure to provoke a shit storm in Congress next week.

AIG "Counterparties" who got the taxpayers' money poured into AIG

$12.9B Goldman Sachs (2.5/5.6/4.8)


$12.0B Bank of America/Merrill Lynch (7.0/2.3/7.6)
$5.2B Bank of America (0.2/0.5/4.5)
$6.8B Merrill Lynch (6.8/1.8/3.1)
$11.9B Societe Generale (4.1/6.9/0.9)
$11.8B Deutsche Bank (2.6/2.8/6.4)
$8.5B Barclays (0.9/0.6/7.0)
$5.0B UBS (0.8/2.5/1.7)
$4.9B BNP Paribas (0.0/0.0/4.9)
$3.5B HSBC Bank (0.2/0.0/3.3)
$3.3B Calyon (1.1/1.2/0.0)
$2.3B Citigroup (0.0/0.0/2.3)
$2.2B Dresdner Kleinwort (0.0/0.0/2.2)
$1.6B JPMorgan/Morgman Stanley (0.6/0.0/1.0)
$0.4B JPMorgan (0.4/0.0/0.0)
$1.2B Morgan Stanley (0.2/0.0/1.0)
$1.5B Wachovia (0.7/0.8/0.0)
$1.5B ING (0.0/0.0/1.5)
$1.1B Bank of Montreal (0.2/0.9/0.0)
$1.0B Deutsche Zentral-Genossenschaftsbank (0.0/1.0/0.0)
$0.8B Rabobank (0.5/0.3/0.0)
$0.7B Royal Bank of Scotland (0.2/0.5/0.0)
$0.7B DZ Bank (0.7/0.0/0.0)
$0.5B KFW (0.5/0.0/0.)
$0.3B Banco Santander
$0.4B Dresdner Bank AG (0.0/0.4/0.0)
$0.4B Credit Suisse (0.0/0.0/0.4)
$0.2B Citidel (0.0/0.0/0.2)

$38.8B US Banks
$50.2B Foreign Banks
$12.0B Municipal Bonds
$84.0B Unaccounted for

Wall Street's Opinion of Taxpayers
Wall Street's Opinion of Taxpayers

Gordon Gekko "Greed is good!

AIG Bailout Math

AIG Pig Waiting To Be Fed by U.S. Taxpayers

Pelosi: One Way or Another, AIG's Bonuses Are Coming Back

By Elana Schor - March 16, 2009, 6:12PM

House Speaker Nancy Pelosi (D-CA), after issuing a statement on Sunday vowing that Congress would examine ways to claw back AIG's $450 million-plus in questionable bonus payments, isn't letting go of the issue.

In a second statement released this afternoon, Pelosi urged the Treasury Department to do "use whatever tools at its disposal" -- legal or otherwise -- to reclaim the bonuses. And she reminded the rest of official Washington that Congress is already on the case.

The American people do not want their tax dollars spent on bonuses for AIG executives who have mismanaged their company into near bankruptcy. AIG executives should voluntarily forgo their excessive retention payments, but if they refuse, the U.S. Treasury should use whatever tools at its disposal to make AIG repay taxpayers.

AIG has turned on its head the basic principle that bonuses and retention payments are rewards for outstanding performance. No taxpayer funds should be used to pay bonuses or other unjustified compensation to AIG executives whose irresponsible risk-taking brought our financial system to the brink of collapse.

This week, Congress will demand further answers from AIG on the steps the government-controlled company will take to repay taxpayers. Congress and the Obama Administration are working to protect taxpayers from such irresponsible misuse of taxpayer funds.


>

We, U.S. taxpayers, should hold individuals accountable, even if AIG and the U.S. government will not. Here's a place to start: the AIG Board of Directors' Compensation and Management Resources Committee:

James F. Orr III, Chairman, Chairman of the Board of Trustees, The Rockefeller Foundation

Stephen F. Bollenbach, Former Co-Chairman and Chief Executive Officer, Hilton Hotels Corporation

Dennis D. Dammerman, Former Vice Chairman of the Board, General Electric Company; Former Chairman, GE Capital Services

Suzanne Nora Johnson, Senior Director, Former Vice Chairman, The Goldman Sachs Group, Inc.

Virginia M. Rometty, Senior Vice President, Global Sales and Distribution, IBM Corporation

— U.S. Taxpayer, Washington, D.C.

Wife of AIG Executive

A.I.G. Sues Government for Tax Refund!

A.I.G. Sues U.S. for Return of $306 Million in Tax Payments

While the American International Group comes under fire from Congress over executive bonuses, it is quietly fighting the federal government for the return of $306 million in tax payments, some related to deals that were conducted through offshore tax havens.

A.I.G. sued the government last month in a bid to force it to return the payments, which stemmed in large part from its use of aggressive tax deals, some involving entities controlled by the company’s financial products unit in the Cayman Islands, Ireland, the Dutch Antilles and other offshore havens.

A.I.G. is effectively suing its majority owner, the government, which has an 80 percent stake and has poured nearly $200 billion into the insurer in a bid to avert its collapse and avoid troubling the global financial markets. 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.

Daily Kos 3-21-o9

Illustration by Victor Juhasz in Rolling Stone
Illustration by Victor Juhasz in Rolling Stone

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Comments 6 comments

Ralph Deeds profile image

Ralph Deeds 7 years ago Author

The following is a letter sent on Tuesday by Jake DeSantis, an executive vice president of the American International Group’s financial products unit, to Edward M. Liddy, the chief executive of A.I.G.

DEAR Mr. Liddy,

It is with deep regret that I submit my notice of resignation from A.I.G. Financial Products. I hope you take the time to read this entire letter. Before describing the details of my decision, I want to offer some context:

I am proud of everything I have done for the commodity and equity divisions of A.I.G.-F.P. I was in no way involved in — or responsible for — the credit default swap transactions that have hamstrung A.I.G. Nor were more than a handful of the 400 current employees of A.I.G.-F.P. Most of those responsible have left the company and have conspicuously escaped the public outrage.

After 12 months of hard work dismantling the company — during which A.I.G. reassured us many times we would be rewarded in March 2009 — we in the financial products unit have been betrayed by A.I.G. and are being unfairly persecuted by elected officials. In response to this, I will now leave the company and donate my entire post-tax retention payment to those suffering from the global economic downturn. My intent is to keep none of the money myself.

I take this action after 11 years of dedicated, honorable service to A.I.G. I can no longer effectively perform my duties in this dysfunctional environment, nor am I being paid to do so. Like you, I was asked to work for an annual salary of $1, and I agreed out of a sense of duty to the company and to the public officials who have come to its aid. Having now been let down by both, I can no longer justify spending 10, 12, 14 hours a day away from my family for the benefit of those who have let me down.

You and I have never met or spoken to each other, so I’d like to tell you about myself. I was raised by schoolteachers working multiple jobs in a world of closing steel mills. My hard work earned me acceptance to M.I.T., and the institute’s generous financial aid enabled me to attend. I had fulfilled my American dream.

I started at this company in 1998 as an equity trader, became the head of equity and commodity trading and, a couple of years before A.I.G.’s meltdown last September, was named the head of business development for commodities. Over this period the equity and commodity units were consistently profitable — in most years generating net profits of well over $100 million. Most recently, during the dismantling of A.I.G.-F.P., I was an integral player in the pending sale of its well-regarded commodity index business to UBS. As you know, business unit sales like this are crucial to A.I.G.’s effort to repay the American taxpayer.

The profitability of the businesses with which I was associated clearly supported my compensation. I never received any pay resulting from the credit default swaps that are now losing so much money. I did, however, like many others here, lose a significant portion of my life savings in the form of deferred compensation invested in the capital of A.I.G.-F.P. because of those losses. In this way I have personally suffered from this controversial activity — directly as well as indirectly with the rest of the taxpayers.

I have the utmost respect for the civic duty that you are now performing at A.I.G. You are as blameless for these credit default swap losses as I am. You answered your country’s call and you are taking a tremendous beating for it.

But you also are aware that most of the employees of your financial products unit had nothing to do with the large losses. And I am disappointed and frustrated over your lack of support for us. I and many others in the unit feel betrayed that you failed to stand up for us in the face of untrue and unfair accusations from certain members of Congress last Wednesday and from the press over our retention payments, and that you didn’t defend us against the baseless and reckless comments made by the attorneys general of New York and Connecticut.

Page 2 of 2)

My guess is that in October, when you learned of these retention contracts, you realized that the employees of the financial products unit needed some incentive to stay and that the contracts, being both ethical and useful, should be left to stand. That’s probably why A.I.G. management assured us on three occasions during that month that the company would “live up to its commitment” to honor the contract guarantees.

That may be why you decided to accelerate by three months more than a quarter of the amounts due under the contracts. That action signified to us your support, and was hardly something that one would do if he truly found the contracts “distasteful.”

That may also be why you authorized the balance of the payments on March 13.

At no time during the past six months that you have been leading A.I.G. did you ask us to revise, renegotiate or break these contracts — until several hours before your appearance last week before Congress.

I think your initial decision to honor the contracts was both ethical and financially astute, but it seems to have been politically unwise. It’s now apparent that you either misunderstood the agreements that you had made — tacit or otherwise — with the Federal Reserve, the Treasury, various members of Congress and Attorney General Andrew Cuomo of New York, or were not strong enough to withstand the shifting political winds.

You’ve now asked the current employees of A.I.G.-F.P. to repay these earnings. As you can imagine, there has been a tremendous amount of serious thought and heated discussion about how we should respond to this breach of trust.

As most of us have done nothing wrong, guilt is not a motivation to surrender our earnings. We have worked 12 long months under these contracts and now deserve to be paid as promised. None of us should be cheated of our payments any more than a plumber should be cheated after he has fixed the pipes but a careless electrician causes a fire that burns down the house.

Many of the employees have, in the past six months, turned down job offers from more stable employers, based on A.I.G.’s assurances that the contracts would be honored. They are now angry about having been misled by A.I.G.’s promises and are not inclined to return the money as a favor to you.

The only real motivation that anyone at A.I.G.-F.P. now has is fear. Mr. Cuomo has threatened to “name and shame,” and his counterpart in Connecticut, Richard Blumenthal, has made similar threats — even though attorneys general are supposed to stand for due process, to conduct trials in courts and not the press.

So what am I to do? There’s no easy answer. I know that because of hard work I have benefited more than most during the economic boom and have saved enough that my family is unlikely to suffer devastating losses during the current bust. Some might argue that members of my profession have been overpaid, and I wouldn’t disagree.

That is why I have decided to donate 100 percent of the effective after-tax proceeds of my retention payment directly to organizations that are helping people who are suffering from the global downturn. This is not a tax-deduction gimmick; I simply believe that I at least deserve to dictate how my earnings are spent, and do not want to see them disappear back into the obscurity of A.I.G.’s or the federal government’s budget. Our earnings have caused such a distraction for so many from the more pressing issues our country faces, and I would like to see my share of it benefit those truly in need.

On March 16 I received a payment from A.I.G. amounting to $742,006.40, after taxes. In light of the uncertainty over the ultimate taxation and legal status of this payment, the actual amount I donate may be less — in fact, it may end up being far less if the


earnestshub profile image

earnestshub 7 years ago from Melbourne Australia

Wow that was a healthy read. I think you have covered the subject well. Recent events may result in some of this loot going back to the taxpayer,but individuals who were involved should be the target.


Misha profile image

Misha 7 years ago from DC Area

LOL Ralph, welcome to your beloved socialism :)

I guess you fail to reconginze that AIG is a government owned corporation nowadays. This is government paying $165 million bonuses and $52 billion to counterparts with taxpayers money LOL


Ralph Deeds profile image

Ralph Deeds 7 years ago Author

My beloved socialism?? I'll plead guilty to believing in effective regulation wrt the structure and activities of financial institutions, but not to socialism. It's true that the government owns 80 percent of AIG, but thanks to the lack of clear regulations and the timidity of government officials, the government has not exercised authority over the operation of the company since it was bailed out last October. There are serious issues about the propriety of allowing taxpayer funds to be "passed through" AIG to its counterparties who purchased insurance (credit default swaps) covering investments in subprime mortgage securities. Goldman Sachs got the biggest chunk of this money, $12.9 billion, which it now says it did not need and did not ask for. However, the Goldman CEO was one of three or four participants in the decision to bail out AIG along with Treasury Secretary Paulson who is a former Goldman CEO. There is something rotten in Denmark in my opinion on this deal.


Misha profile image

Misha 7 years ago from DC Area

Oh, no questions about rotten and issues, it's all there. As for socialism, I must have mixed you for somebody else. Did you vote against Obama, too? ;)


Ralph Deeds profile image

Ralph Deeds 7 years ago Author

Nope. I voted for the O-man, and I helped out a bit on his campaign.

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