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Cuomo Says 73 AIG Employees Received $1 Million Bonuses or More

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In the latest chapter of the AIG bonus affair, New York Attorney General Andrew Cuomo sent the following letter to Rep. Barney Frank March 17.

Dear
Chairman Frank:

I
am writing to provide you and your Committee with information regarding
an ongoing investigation my Office has been conducting of executive
compensation at American International Group ("AIG"). I hope this
information will be useful to the Committee at its hearing on AIG
tomorrow.

We
learned over the weekend that AIG had, last Friday, distributed more
than $160 million in retention payments to members of its Financial
Products Subsidiary, the unit of AIG that was principally responsible
for the firm's meltdown. Last October, AIG agreed to my Office's demand
that no payments be made out of its $600 million Financial Products
deferred compensation pool. While this was a positive step, we were
dismayed to learn after the fact that AIG had made multi-million dollar
payments out of its separate Financial Products retention plan on
Friday.

AIG now claims that it had no choice but to
pay these sums because of the unalterable terms of the plan. However,
had the federal government not bailed out AIG with billions in taxpayer
funds, the firm likely would have gone bankrupt, and surely no payments
would have been made out of the plan. My Office has reviewed the legal
opinion that AIG obtained from its own counsel, and it is not at all
clear that these lawyers even considered the argument that it is only
by the grace of American taxpayers that members of Financial Products
even have jobs, let alone a pool of retention bonus money. I hope the
Committee will take up this issue at its hearing tomorrow.

Furthermore,
we know that AIG was able to bargain with its Financial Products
employees since these employees have agreed to take salaries of $ I for
2009 in exchange for receiving their retention bonus packages. The fact
that AIG engaged in this negotiation flies in the face of AIG's
assertion that it had no choice but to make these lavish multi-million
dollar bonus payments. It appears that AIG had far more leverage than
they now claim.

AIG also claims that retention of
individuals at Financial Products was vital to unwinding the
subsidiary's business. However, to date, AIG has been unwilling to
disclose the names of those who received these retention payments
making it impossible to test their claim. Moreover, as detailed below,
numerous individuals who received large "retention" bonuses are no
longer at the firm. Until we obtain the names of these individuals, it
is impossible to determine when and why they left the firm and how it
is that they received these payments.

If
AIG were confident in its claim that those who received these large
bonuses were so vital to the orderly unwinding of the unit, one would
expect them to freely provide the names and positions of those who got
these bonuses. My Office will continue to seek an explanation for why
each one of these individuals was so crucial to keep aboard that they
were paid handsomely despite the unit's disastrous performance.

As

you may know, my Office yesterday subpoenaed AIG for the names of those
who received these bonuses, and we plan to do everything necessary to
enforce compliance. American taxpayers deserve to know where their
money is going, and AIG's intransigence and desire to obscure who
received these payments should not be tolerated. Already my Office has
determined that some of these bonuses were staggering in size. For
example:

-- The top recipient received more than $6.4 million;

--
The top seven bonus recipients received more than $4 million each;

-- The top ten bonus recipients received a
combined $42 million;

-- 22 individuals received bonuses of $2 million or more, and combined they received more
than $72 million;

-- 73 individuals received bonuses of $1 million or more; and

--
Eleven of the individuals who received "retention" bonuses of $1
million or more are no longer working at AIG, including one who
received $4.6 million;

Again,

these payments were all made to individuals in the subsidiary whose
performance led to crushing losses and the near failure of AIG. Thus,
last week, AIG made more than 73 millionaires in the unit which lost so
much money that it brought the firm to its knees, forcing a taxpayer
bailout. Something is deeply wrong with this outcome. I hope the
Committee will address it head on.

We have also now obtained the contracts under
which AIG decided to make these payments. The contracts shockingly
contain a provision that required most individuals' bonuses to be 100%
of their 2007 bonuses. Thus, in the Spring of last year, AIG chose to
lock in bonuses for 2008 at 2007 levels despite obvious signs that 2008
performance would be disastrous in comparison to the year before. My
Office has thus begun to closely examine the circumstances under which
the plan was created.

I

look forward to continuing to cooperate with the Committee in any way
possible to ensure that taxpayer funds are not misspent on unjustified
bonuses or otherwise misused.

Very truly yours,

Andrew M. Cuomo

Attorney
General of the State of New York

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