Posted on 03 Feb 2010
American International Group Inc. is moving forward with a plan to accelerate bonuses to employees of its financial products division after they agreed to a $20 million reduction in $195 million of previously promised awards.
Some lawmakers on Tuesday evening took issue with the move to pay out as much as $100 million in bonuses this week.
The $20 million AIG secured from former and current employees at AIG Financial Products will go toward a commitment it made to recoup $45 million of bonus payouts last year to employees of the division. Bonuses then caused an uproar because the unit had been responsible for the soured trades that precipitated the government rescue of the company.
By last August, employees indicated they would return a total of $45 million, of which $19 million had been collected. That left $26 million to go. AIG is trying to reduce the March 2010 payments by more than that amount, using some of the reductions to cover the 2009 amounts that it needs to recoup and some to reduce the 2010 payouts.
U.S. pay czar Kenneth Feinberg has insisted that AIG get back the $45 million. A spokesperson for Treasury, where Mr. Feinberg works, said Tuesday: "These payments are tied to employment contracts from 2007 that fell outside the jurisdiction of [Mr. Feinberg] and the law. We are encouraged that AIG employees are making good on the repayment pledges they made last spring."
Rep. Darrell Issa (R., Calif.) questioned whether the Obama administration was being "transparent with the American people" about the bonuses "since the President expressed outrage over this very issue a year ago." He said in a statement: "Either the payments are justified and the Administration has an obligation to explain that to the American people or they are not and they should come forward and say so."
AIG said it believed the recouped $20 million "allows us to largely put the matter behind us." The company added it will continue to work with former employees to recoup the remainder "over the next few months."
Separately, the company named as its new general counsel 66-year-old old Thomas Russo, the former chief legal officer of Lehman Brothers Holdings Inc. through its collapse and subsequent bankruptcy.
Mr. Russo in an interview said he relished the challenge of helping the insurer pay back over $90 billion to U.S. taxpayers, and retain some value for employees and shareholders.
"I think AIG has a good shot or else I wouldn't be joining," he said. Mr. Russo compared himself to 40-year-old Minnesota Vikings quarterback Brett Favre, who shunned retirement only to be jostled in his most recent game against the New Orleans Saints. "I think he did the right thing by not retiring. It was the challenge."
Mr. Russo will helm one of the most important—but politically fraught—functions at the company. As the person in charge of compliance, regulatory affairs and government affairs, Mr. Russo will have to help mend relations with the U.S. government, which assumed 80% control of AIG in a still-controversial bailout in the fall of 2008.
Mr. Russo replaces general counsel Anastasia Kelly, who resigned at the end of 2009 after her pay was reduced due to federal pay curbs imposed on firms that have received large amounts of government aid.
AIG on Tuesday also announced the appointments of five other senior executives to oversee internal audit, human resources, communications, operations and systems. They included new hires and promotions of current AIG staffers. Chief Executive Robert Benmosche said the appointments would add "another dimension of experience and energy" to AIG, which he said still faces "enormous challenges."
The new hires include Sandra Kapell, who worked at Mr. Benmosche's former employer, MetLife Inc., for six years. She was named AIG's global head of talent strategy and performance systems, reporting to Jeffrey Hurd, an AIG executive who has held multiple roles and was recently appointed head of human resources. The company also named Paulette Mullings Bradnock, an AIG executive since 2005, as director of internal audit.