House Panel Wants Probe of AIG's P.R. Contracts
R. J. Lehmann
A. M. Best
April 15, 2009
WASHINGTON, Apr 15, 2009 (A. M. Best via COMTEX) -- The chairman of the House Oversight Committee wants to know if American International Group Inc. used part of the government's $182.5 billion rescue plan toward fomenting a media campaign critical of former long-time Chairman Maurice R. "Hank" Greenberg.
In a letter to current AIG Chairman Ed Liddy, Rep. Edolphus Towns, D-N.Y., asks the company to share all communications it has had with the Burson-Marsteller and Hill & Knowlton public relations firms, as well as any other contractors it has hired to address public questions about the bailout. AIG (NYSE: AIG) has until April 28 to comply with the requests.
Towns also asked Liddy to answer whether the company or its contractors prepared a report called "The Greenberg Legacy," reportedly distributed anonymously to members of the news media on the eve of Greenberg's April 2 testimony before the committee. During that appearance, Greenberg told the committee the current approach of federal officials and government-installed leadership "has not worked, and cannot work in today's environment" (BestWire, April 2, 2009).
"I would be extremely disappointed to learn that any of the billions of taxpayer dollars invested to support AIG may have been diverted to finance a public relations campaign against critics of the AIG bailout," Towns wrote. "In my view, these allegations warrant further inquiry to ensure that federal funds are not being misused."
AIG spokesman Mark Herr said the company felt it necessary to correct "false and misleading statements" its former chairman had made "in more than 30 media appearances since the beginning of the year and elsewhere." Among the points the company looked to clarify were Greenberg's "role in creating AIG Financial Products and its credit default swap business, as well as the circumstances surrounding his forced departure from AIG during an accounting fraud investigation," Herr said.
"We look forward to providing Congressman Towns with background on why it has been necessary to correct these and other misstatements, which are both misleading to the American public and damaging to AIG and its ability to repay taxpayers," Herr said. "This issue is not about AIG's corporate public relations expenditures, which are down sharply since last year. It is about correcting Mr. Greenberg's false and damaging statements."
Greenberg, who continues to be one AIG's largest shareholders, has said federal officials should have "walled off" the AIG Financial Products unit, which wrote credit default swap contracts that nearly bankrupted the company last year, and offered guarantees to AIGFP's counterparties rather than providing billions in cash collateral.
Under a plan the former chairman outlined for Towns' committee, the government would extend the maturity of all remaining AIG debt to a 20-year term; reduce the rate on all remaining debt to 5%; and reducing government ownership to 15% of common equity. The U.S. Treasury currently holds warrants for nearly 80% of AIG's common equity.
Towns is planning additional hearings in April and May, including one later this month with Liddy.
Most AIG insurance companies currently have a Best's Financial Strength Rating of A (Excellent) with a negative outlook.
Shares of AIG were trading at $1.60 in midday trading April 15, up 5.3% from the previous close.
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