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AIG Financial Product Unit on the Hook for Millions in Retention Payments to . . . Former Employees?

Posted on 22 Jan 2010

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According to sources familiar with the matter, a substantial number of employees of AIG's Financial Products subsidiary who are slated to receive approximately $195 million in so-called retention payments no longer work for the company. The sources say the employees were laid off by the Wilton, Connecticut-based unit after completing their assignments.

This will mark the latest round of retention payments made to employees of the AIG unit whose business practices involving credit derivatives resulted in the insurer's near-catastrophic, multimillion-dollar losses in September 2008.

This latest round of payments comes at a time of escalating public and political criticism over big bonuses for Wall Street executives. Prominent Wall Street firms such as Goldman Sachs Group Inc and Morgan Stanley are planning to pay employees millions in bonuses in the aftermath of receiving millions more in bailouts funded by U.S. taxpayers. Whether or not such bonuses are lower figures than those typically paid out, which some firms have affirmed, the payouts nevertheless are continuing to come under serious fire.

A $165 million payment to AIG Financial Products employees in March of 2009 led to verbal assaults by politicians and several public demonstrations, including a bus tour of employees’ homes near the unit's headquarters, and threats to others.