Blumenthal Urges Stop to $230 Million in AIG Bonuses (Update2)
By Karen Freifeld
March 27, 2009
March 27 (Bloomberg) -- American International Group Inc. should be stopped by the federal government from paying another $230 million in bonuses, Connecticut Attorney General Richard Blumenthal said.
In a letter today to Federal Reserve chairman Ben S. Bernanke, Blumenthal urged "every available action" to block the bonuses. An AIG document provided by the attorney general's office indicates the $230 million is set to be paid to 407 people in March 2010.
Blumenthal is among a coalition of 19 state attorneys general investigating AIG for the possible misuse of federal bailout money and compensation policies that, he said, encouraged "financial gambling" in derivatives including credit-default swaps.
"By failing to block these bonuses, the Fed will be aiding and abetting AIG in squandering another $230 million in taxpayer dollars -- bringing the total to $448 million by next year," Blumenthal said in a statement. "The AIG Financial Products unit is supposedly winding down, but the bonuses are ratcheting up."
There is "no way" the full $230 million in retention bonuses will be paid in 2010, AIG Chief Executive Officer Edward Liddy told lawmakers in a March 18 congressional hearing. "I would expect that most of those people will be gone," he said.
AIG said in a statement today that Liddy also informed Treasury Secretary Timothy Geithner in a March 14 letter the payments would be reduced.
"Mr. Liddy advised him that we expected see reduced payments for this time period and that we would use our best efforts to reduce those payments by at least 30 percent," AIG spokesman Mark Herr said in an e-mailed statement. "We still believe this to be the case."
Federal Reserve spokesman David Skidmore declined to comment.
Blumenthal said Connecticut wage laws don't require the bonuses to be paid, contrary to some claims.
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