AIG Trustees Asked to Testify to Congress on Stake (Update2)

By Hugh Son
Bloomberg News
April 28, 2009


April 27 (Bloomberg) -- American International Group Inc.'s three trustees, appointed to oversee the government's stake in the insurer, may testify before Congress next week about whether they've been adequately protecting the U.S. investment.

Jill Considine, Chester Feldberg and Douglas Foshee were asked to appear on May 6 at a hearing along with Chief Executive Officer Edward Liddy, according to letters today from Representative Edolphus Towns, chairman of the House Committee on Oversight and Government Reform.

The Congressional hearing is the first scheduled public appearance for the panel, which is under pressure from lawmakers to show they are helping to turn around the New York-based insurer. AIG has received four bailouts, valued at $182.5 billion, since agreeing in September to turn over a majority stake to the government. The three, appointed in January, were asked by Towns to explain their efforts monitoring the firm.

"I want to know what they've been up to," said Richard Ferlauto, a director of corporate governance at the American Federation of State, County and Municipal Employees. "The frustration is that this is the 80 percent owner who represents taxpayer interests, and yet there's very little awareness" about who they are, he said.

'Prepared to Talk'

The three individuals wield the 77.9 percent stake of AIG held in a trust, AIG said in a filing last month. They control votes on asset sales, mergers and the selection of board members and top executives. AIG's annual meeting, at which shareholders vote on board members, has been postponed, the insurer said last week. The session was previously scheduled for May 13.

Ferlauto's union asked the trustees last month to block re- election of an AIG board member on the compensation committee. The union, whose members own AIG shares, said the insurer unnecessarily gave retention pay to employees of the Financial Products unit that helped cause the company's near collapse.

Peter Bakstansky, a spokesman for the trustees, said he expects Considine and Feldberg will testify at the hearing, and that Foshee, CEO of natural gas producer El Paso Corp., has an annual meeting scheduled for that day.

Considine and Feldberg are "prepared to talk about" what they've been doing since their appointment, Bakstansky said. Towns, a New York Democrat, sent Liddy a letter last week requesting he testify on May 6.

Considine is a former chairman of the Depository Trust & Clearing Corp. and served a six-year term on the Federal Reserve Bank of New York's board, where she was chairman of the audit and operational risk committee. She was the New York State superintendent of banks from 1985 to 1991.

'Binding Obligation'

Feldberg, former chairman of Barclays Americas, was an executive vice president in charge of the New York Fed's Bank Supervision Group for nine years through 2000.

Foshee was chief operating officer at oilfield services provider Halliburton Co. before joining El Paso in 2003.

The trustees "have a legally binding obligation to exercise all their rights as majority owner of AIG in the best interest of the U.S. taxpayer," said William Dudley, president of the Federal Reserve Bank of New York, in a March 24 congressional hearing. They each earn $100,000 a year, the New York Fed said in January.

"These are very capable public servants," Treasury Secretary Timothy Geithner said at the hearing.

AIG's rescue includes an investment of as much as $70 billion in preferred stock and warrants, $52.5 billion to buy assets owned or backed by the insurer, and a $60 billion credit line. AIG had tapped about $44 billion on that line as of April 22.

Copyright © 2009 FBIC (www.badfaithinsurance.org)


Click here to return to FBIC homepage