December 4 2008
Here is a copy of the letter that Rep. Elijah E. Cummings (D-Md.), a senior member of the House Committee on Oversight and Government Reform and a member of the Joint Economic Committee, sent Edward Liddy, President & CEO of AIG, yesterday.
December 1, 2008
Mr. Edward M. Liddy
Chief Executive Officer
American International Group, Inc.
70 Pine Street
New York, NY 10270
Dear Mr. Liddy:
I write today to request that American International Group (AIG) fully disclose to the public the extent of the payments being made to senior company executives under your employee “retention program.” The limited information that is currently available to the public about this program is insufficient to constitute the level of disclosure that the American taxpayers, who have bailed out this firm repeatedly in recent weeks, have the right to expect.
In form 8-K dated September 22, 2008, and filed with the Securities and Exchange Commission (SEC), AIG disclosed the following: “On September 22, 2008, a retention program of American International Group, Inc. (“AIG”) became effective. The program applies to approximately 130 executives and consists of cash awards payable 60 percent in December 2008 and 40 percent in December 2009.”
AIG has recently indicated that it will not provide performance bonuses in 2008. However, in what appears to be a disingenuous “slight of hand,” AIG has announced its intention to continue to provide the retention program payments (commonly known as retention bonuses) previously announced in September – albeit some executives have apparently opted to delay receipt of these payments (but not to forgo them). Thus, in form 8-K dated November 24, 2008, and filed with the SEC, AIG disclosed the following: “On November 24, 2008, the Executive Officers of American International Group, Inc. (“AIG”) who participate in its previously disclosed retention program, including Chief Financial Officer David Herzog and Executive Vice President Jay Wintrob, volunteered to delay payments thereunder, with the first installment being delayed from December 2008 until April 2009 and the second installment being delayed from December 2009 until April 2010. Chairman and Chief Executive Officer Edward M. Liddy does not participate in this program.”
In September of this year (and several days prior to the SEC filing announcing the “retention program”), the U.S. taxpayers provided a bailout loan of $85 billion to keep AIG afloat; in return, the federal government received an ownership stake in the firm. Subsequent actions increased the total size of the bailout to more than $150 billion – and restructured some of the initial loans provided to the firm. Without taxpayer intervention, AIG would have ceased to exist and, to be blunt, all of its employees would have lost their jobs.
Against this background – and given the massive layoffs occurring at other major financial entities, such as Citibank – the American taxpayers have a right to know why senior executives at AIG, who are frankly lucky to still have jobs, need to receive additional bonus payments of any kind to retain them at AIG. To that end, I request that AIG disclose to the public the following information:
1. Which executives in which AIG divisions are receiving the retention payments – and how much is each executive receiving” What are the base salaries of the executives receiving the retention payments?
2. Are all executives delaying receipt of these payments until April 2009 – or, if any executive is not delaying receipt of the payments, which executive or executives is/are receiving payments in December 2008 and how much is each executive receiving?
3. Why is it necessary for any AIG executive to receive a retention payment – and why is it necessary that these be scheduled for April 2009 and April 2010?
4. What will be the source of the retention payments provided in 2009 and 2010?
AIG has previously claimed in correspondence to me that it is working “to create a transparent, accountable culture to regain the trust of the American people.” The disclosure of the information requested here will be a first step toward providing the kind of transparency that the American people have the right to expect from a private firm to which they have provided more than $150 billion in financial assistance.
Elijah E. Cummings
Member of Congress
AIG Should Name Staff Getting Payments, Cummings Says
December 2 2008
By Hugh Son
American International Group Inc., the insurer rescued from failure by the U.S., should name executives getting “retention” payments and explain why the awards are needed, said Representative Elijah Cummings.
AIG, which said in a September filing that 130 managers will get “cash awards” to stay through 2009, isn’t providing enough information, said Cummings, a Maryland Democrat on the House Committee on Oversight and Government Reform, in a letter to AIG dated yesterday.
“Taxpayers have a right to know why senior executives at AIG, who are frankly lucky to still have jobs, need to receive additional bonus payments,” Cummings said in the letter.
Financial firms bailed out by the U.S. Treasury’s $700 billion rescue fund are under pressure to curb executive pay and perks. AIG Chief Executive Officer Edward Liddy said Nov. 25 that the insurer will freeze pay and forgo bonuses for seven top leaders. The next day, AIG disclosed that retirement services chief Jay Wintrob will still get a previously announced retention payment of $3 million.
Wintrob, 51, will get the payment in two installments, the first in April 2009 and the rest a year later, AIG said in a regulatory filing. Chief Financial Officer David Herzog, 48, will also get the payments, which will be given four months later than previously planned, AIG said. The company didn’t name any other recipients, or the size of payments apart from Wintrob’s.
Nicholas Ashooh, a spokesman for New York-based AIG, didn’t immediately return a call today. He said Nov. 26 that the retention awards are different from annual bonuses. Cummings responded in a letter the same day that called on Liddy to quit, saying that the CEO rewarded failure and misled the public.
“AIG made some grand pronouncements about how they were going to change their bonus structure, but they found ways to give their people the same things,” Cummings said today in a phone interview. It’s unclear why retention pay is needed “when thousands of people would line up to take their jobs,” he said.
Finance and insurance positions in New York declined by 16,900 in the year through October, the state Labor Department said last month, as firms posting profit declines or losses seek to trim expenses.
AIG climbed 22 cents to $1.87 at 4:09 p.m. in New York Stock Exchange composite trading. The stock has plunged by 97 percent this year.
The company got an expanded government rescue package last month worth more than $150 billion after being overwhelmed by bad bets on U.S. housing that led to $43 billion in losses over four straight quarters.
AIG is selling businesses, including the retirement services unit Wintrob heads, to repay a $60 billion U.S. loan. The firm also got a $40 billion capital infusion from the Treasury and more than $50 billion for two funds that will buy securities tied to mortgages.
So they changed the name from “Bonues” to “Cash Award”.
How pathetic. There is no real difference. What BS. Now I have heard it all.
What a bunch of bums.
They never should not have bailed them out in the first place.