New York Attorney General Andrew Cuomo is threatening legal action to recover “unwarranted and outrageous” expenditures by American International Group Inc., including compensation payments to former executives.
In a letter to AIG’s board Wednesday, October 15, Cuomo charged that as the insurer was nearing a financial collapse, it “nevertheless made numerous extraordinary expenditures in the form of executive compensation payments, junkets and perks for its executives.”
Without mentioning them by name, the letter cites compensation awards to former CEO Martin Sullivan and to Joseph Cassano, former president of the company’s financial products division. AIG’s board awarded Sullivan a $5 million cash bonus and a golden parachute worth $15 million when his employment agreement was extended in March 2008, according to the letter and Securities and Exchange Commission filings. Cassano—who was terminated in February 2008 as his division’s huge credit default swap losses were emerging—was allowed by AIG’s board to keep $34 million in bonuses and continued to receive $1 million a month until recently, the letter says.
“Moreover, even after the taxpayer-funded bailout of AIG, the company paid hundreds of thousands of dollars for luxurious retreats for its executives, including an overseas hunting party and golf outing,” Cuomo wrote.
Cuomo charges that the payments constitute fraudulent conveyances under New York law, and demands in the letter that AIG’s board provide an accounting of compensation and other expenditures and “review, rescind and recover all improper payments where appropriate.”
“If the board fails to take these actions, we will do so pursuant to the fraudulent conveyance laws of New York,” the letter warns.
In a statement, an AIG spokesman said, “Attorney General Cuomo’s concerns are immediately being brought to the attention of the board.
“On October 10, we issued a directive ending all activities that are not absolutely essential to the conduct of our business,” the spokesman said. “AIG’s priority is to continue focusing on the actions necessary to repay the Federal Reserve loan and emerge as a vital ongoing business.”
Filed by Douglas McLeod of Business Insurance, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.
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