Posted on 17 Mar 2010
Several former American International Group employees might sue the insurer after it gave them less retention bonus money than they should have received, Reuters reported, citing lawyers for the employees.
As The New York Times reported Monday, AIG is planning to hold back $21 million in retention bonuses for employees of its Financial Products unit in the hope that the move will put to rest a controversy that has plagued the insurer since its government rescue in the fall of 2008.
The insurer is asking former employees who are eligible for the payout what they earned after leaving AIG so it can reduce the retention bonus payments by that amount, Gary Phelan, a partner at law firm Outten & Golden, which represents eight current and former employees, told Reuters.
“They’ve had several months to determine whether or not any payment should be offset,” Mr. Phelan told Reuters. “Unless there’s a very quick payment made of the balance 25 percent, I think (a lawsuit) is inevitable.”
The bonuses in question were contractually granted early in 2008, months before the bailout, and were scheduled to be paid over two years. The original goal of the bonus program was to retain employees. But after the taxpayers came to A.I.G.’s rescue, the scheduled bonus payments seemed politically unthinkable as they covered people at the financial products unit, which dealt in the derivatives at the heart of A.I.G.’s near-collapse.
While Federal policy makers and AIG’s legal advisers have argued that it would be illegal to break the contract, AIG now believes it has found a valid way to withhold at least $21 million from what is supposed to be the final payout, The New York Times reported, citing a person with knowledge of the arrangements. The bonus contract language says that payments to people with outside income can be reduced by the amount of that income, according to this person.