Posted on 30 Apr 2009
American International Group Inc. said it has persuaded a key executive at a French subsidiary to remain at the company, a development that wards off the risk that his departure could help trigger defaults on $234 billion in derivative contracts.
James Shephard, who earlier had resigned, has decided to remain at Banque AIG, part of AIG's financial products unit, a spokesman said.
At least 10 other employees of the unit who had resigned in the wake of a flap in March over retention bonuses have also changed their minds, according to a person familiar with the matter. Previously, 20 of the unit's roughly 360 employees had resigned; now that number is under 10, the person said.
The unit helped drive the company to the brink of bankruptcy before a federal rescue last year, and the company has been in the process of winding it down. At the time the bonuses were paid, the company indicated to the Treasury Department that failure to pay them "could have very significant business ramifications."
Wednesday, a spokesman said: "This will help to continue to provide Banque AIG, AIGFP and AIG with the experienced and stable leadership necessary to continue the progress we have made in reducing risk in these challenging times."
The other Banque AIG executive who resigned, Mauro Gabriele, is still leaving, the person familiar with the matter said. Mr. Shephard, who was Mr. Gabriele's deputy, is taking the job as top executive.
He will get a new deputy, Guillaume de Lamaziere, who was formerly the head of accounting policy at AIG's financial services division and who will become Banque AIG's chief operating officer.
AIG did not immediately make Mr. Shephard available for comment.
News of Mr. Shephard's decision was earlier reported by the Financial Times.
The derivative contracts AIG had sold to various European banks were used by them to hedge risk in some assets they held, which limited the capital they needed to hold against those investments.
In the event of a change at the top of Banque AIG, the company had to find replacements that met with the satisfaction of French regulators. Otherwise, the regulators could appoint their own designee, which could in turn trigger defaults on the derivative contracts.
On Wednesday, a spokesman for Commission Bancaire, the French banking regulator, declined to comment.
Messrs. Shephard and Gabriele were among the initial group of employees who resigned, though they had agreed to stay on for a transition period. Both men, like many other employees at the unit, agreed to give back their bonuses, according to a person familiar with the matter.