A.I.G. Chief Expected to Offer Bonus Compromise
By DAVID STOUT and LOUISE STORY
Published: March 18, 2009
Edward M. Liddy, the embattled chief of American International Group, is expected to ask employees who received lucrative bonuses to give half the money back.
According to a person briefed on Mr. Liddy’s plans, the A.I.G. chief will announce this plan during his testimony this afternoon before a Congressional committee that is investigating the problems at company.
Given the public outcry over the $165 million in bonuses paid out last week, it is unclear whether Mr. Liddy’s plan will appease lawmakers, who have threatened to develop new tax rules or file lawsuits to get the money back. A.I.G. has received nearly $200 billion in federal bailout funds.
The bonuses were paid to 418 A.I.G. employees last week as part of a retention plan, but 52 of those workers have already left the company, according to New York’s attorney general, Andrew M. Cuomo.
Mr. Liddy’s plan to request half of the bonus money back was not included in his prepared testimony released to the public in advance of the hearing. Such an action would be highly unusualfor a financial company.
A spokesman for A.I.G. declined to comment.
The development came as a wave of Congressional condemnation greeted Mr. Liddy on Wednesday over the bonuses paid to company executives, with some lawmakers vowing to do something to get the money back.
“We are the effective owners of this company,” said Representative Barney Frank of Massachusetts, the chairman of the House Financial Services Committee, going on to suggest a lawsuit to recover the $165 million in bonuses. “I think it’s worth trying.”
It was clear that lawmakers were in no mood to hear A.I.G.’s chief, say, as he did in his prepared text, that, while the bonuses were “distasteful,” they were the result of the company’s legal obligation to honor its employment contracts.
By “we,” Mr. Frank made clear, he meant the American taxpayers, whose collective anger has been felt on Capitol Hill over the last several days. And no wonder, said Representative Gary L. Ackerman, a Democrat from Long Island. The typical taxpayer knows he is “the ultimate sucker” in the A.I.G. debacle, Mr. Ackerman said.
The lawmakers, having heard from their furious constituents, seemed unwilling to be mollified by the pledge from Mr. Liddy, who took the helm at A.I.G. last fall after it had begun imploding because of reckless investments, that the company’s 116,000 employees were united in wanting to work out of the morass, and work “shoulder to shoulder” with federal regulators.
Instead, the lawmakers were focused on the recipients of seven-figure bonuses at the very unit that caused A.I.G. “to teeter on the brink of collapse,” as Representative Paul E. Kanjorski, the Pennsylvania Democrat who heads the capital markets subcommittee, put it.
“A million dollars is a sizable sum to the typical American family,” Mr. Kanjorski said, “and a million dollars is a lottery prize for anyone who has just lost a job.” He called on A.I.G.’s employees to join with the legions of Americans who “have made personal sacrifices to survive these difficult times.”
It was clear even before the start of the hearing by the subcommittee that there was the potential for emotional outbursts from the audience, enough potential that Mr. Frank warned at the outset that there would be “no heckling,” and that he would have people arrested, if necessary.
Representative Spencer Bachus of Alabama, a leading Republican on the panel, urged his colleagues not to be distracted by what he said should be their true goal, “trying to recover as much taxpayers’ money as possible.”
Mr. Bachus said Congress should feel some responsibility for the mess, given an apparent failure to regulate adequately in recent years. “The American people are paying for it,” he said.
But for the moment, the focus was on the 418 so far unnamed recipients of the bonuses, paid out after A.I.G. was receiving $170 billion in public money after its near-collapse threatened not only the company but the entire financial system.
Mr. Frank threatened to issue subpoenas, if necessary, to make public the names of the bonus recipients.
“Morally reprehensible,” Representative Carolyn B. Maloney, Democrat of New York, called the bonuses. No one disagreed.
Nor did anyone disagree with Mr. Liddy when he said A.I.G. had made mistakes “on a scale few could have ever imagined possible.”
“The most critical of those mistakes was that the company strayed from its core competencies in the insurance business,” Mr. Liddy said in prepared text. “Those missteps have exacted a very high price, not only for A.I.G. but for America’s taxpayers, the federal government’s finances and the economy as a whole.”
“We are meeting today at a high point of public anger,” said Mr. Liddy, a former chief executive of Allstate who was installed as A.I.G.’s chief when the Federal Reserve announced its rescue package. “I share that anger. As a businessman of some 37 years, I have seen the good side of capitalism. Over the last few months, in reviewing how A.I.G. had been run in prior years, I have also seen evidence of its bad side.” |
