Since December, AIG has delivered $218 million in bonuses to keep employees working at its dying Financial Products subsidiary in Wilton, CT. AIG executive Stephen Blake confirmed in testimony before the legislature's Banks Committee Thursday that the company plans to deliver more bonuses in March 2010. That would bring the total of so-called retention bonuses paid to division employees -- designed to keep them working long enough to dismantle the business -- to as much as $451 million.
Bernanke told Congress earlier this week that he had wanted to file a lawsuit to block the bonuses that were delivered to employees this month, but was advised not to because of Connecticut's wage act. The Connecticut law, Bernanke said, could grant employees "substantial punitive damages" if the government lost the suit.
Blumenthal said he sent a letter to Bernanke Friday emphasizing his contention, made repeatedly since the state law was cited as reason to pay the bonuses, that the payments are not protected under the law. He urged the Federal Reserve to "go ahead -- immediately -- to stop these supersized taxpayer-funded windfalls."
Our message to the Fed: Don't be deceived by AIG's flawed legal bluffs," Blumenthal said. "Connecticut's labor laws protect fair and lawful wages -- payments linked to specific and measurable work -- not runaway multi-million-dollar payments labeled retention bonuses."
AIG officials have said all along that the company promised Financial Products division employees bonuses this year and next if they stayed to help disassemble the business. But Chief Executive Edward Liddy has said the company is renegotiating the $232 million in bonuses scheduled to be paid next March.
Blake told the state Banks Committee Thursday that that figure is shrinking as division employees continue to resign, many because of threats and harassment over the bonuses. Several executives have resigned in the past two weeks, Blake told the committee. Liddy was subpoenaed to appear before the committee Thursday, along with 13 other current and former AIG employees, but only Blake attended.