New York Attorney General Andrew M. Cuomo said American International Group Inc. has agreed to freeze the $19 million plus other benefits provided for former CEO Martin Sullivan in his employment package.
In a letter Wednesday, October 22, to current AIG chairman and CEO Edward M. Liddy, and at a press conference, Cuomo said AIG also has agreed that no funds would be distributed out of the $600 million deferred compensation and bonus pools of AIG’s Financial Products subsidiary, which was the source of the credit default swaps that have caused the insurer’s current problems.
“It is my understanding that Joseph Cassano, the former head of the subsidiary, has a share totaling approximately $69 million of these funds,” said Cuomo in his letter. “In addition, after Cassano, five other top executives in AIG Financial Products have a combined share in these funds totaling approximately $93 million.
“The American taxpayer is now supporting AIG, making the preservation of these taxpayer funds a vital obligation and a priority responsibility of your company,” Cuomo said in his letter. “Taxpayers are, in many ways, now like shareholders of your company, and the new AIG has a responsibility to them in the first instance.”
At the press conference, Cuomo was asked whether he would pursue payments that have been made to former chairman and CEO Maurice R. Greenberg. Cuomo responded, “We have a separate case pending against Mr. Greenberg, and that’s been an ongoing matter.”
At the conference, Cuomo said, “My position is, until the taxpayers recoup their investment in AIG, which is now $120 billion, plus interest, there should not be any contemplation of … executive bonuses, because I find it hard to conceive of a situation where executives could justify performance bonuses for management that virtually bankrupts the company. I don’t want to add insult to injury.”
Cuomo said his first step would be to freeze compensation and bonuses. Step two, he said, “which is more ambitious,” is to determine “to what extent you can actually recapture money that has already been paid,” which is an issue that is now being reviewed under New York's Uniform Fraudulent Conveyance Act.
“Everyone’s talking about toxic assets,” he said. “But let’s also realize there were toxic practices that created the problem of the toxic assets.”
Last week, Liddy agreed to help Cuomo recover bonuses and other payments to former executives. Liddy also agreed to end “all junkets and perks” for executives, canceling scores of planned AIG events that would have cost the company more than $8 million.
Filed by Judy Greenwald of Business Insurance, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.
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