Cuomo calls for end to AIG's 'party'
N.Y. law official probes insurer's recent spending
New York Attorney General Andrew Cuomo is investigating "unwarranted and outrageous expenditures" at American International Group, which received an $85 billion federal bailout last month.
In a letter to AIG's board of directors, Cuomo demanded the company stop "extravagant" expenditures and recover millions of dollars in unreasonable payments, or face legal action.
Cuomo cited a $5 million bonus and a $15 million golden parachute AIG awarded its chief executive in March. Martin Sullivan was AIG's chief executive at the time. Cuomo said the company also spent hundreds of thousands of dollars on "luxurious retreats" for executives, including an overseas hunting party and a golf outing. Reports yesterday said a handful of top executives from AIG spent thousands of dollars during a recent English hunting trip.
"This was an annual event for customers of the AIG property casualty insurance companies in the UK and Europe, and planned months before the Federal Reserve Bank of New York's loan to AIG," company spokesman Peter Tulupman said yesterday.
"The party is over," Cuomo said yesterday. "No more hunting trips. No more luxury resorts. They are not going to have the party and leave the hangover for the taxpayers."
AIG has been castigated by officials since the New York-based insurer hosted a $440,000 conference at a California resort last month after agreeing to the federal bailout to avoid bankruptcy. The government offered AIG an $85 billion loan. The company may access an additional $37.8 billion from the Federal Reserve Bank of New York to replenish liquidity.
In a letter released Friday, House Financial Services Committee chairman Barney Frank told Treasury Secretary Henry Paulson and Federal Reserve chairman Ben Bernanke the executives responsible for the gathering should "personally reimburse the government," and requested increased oversight of the company.
Cuomo said in his letter the expenditures violated the state's debtor-creditor law and demanded an accounting of AIG's executive compensation and benefits since January 2007. He said the government's financial rescue of AIG made the expenditures "even more irresponsible."
Cuomo's letter "will be brought to the immediate attention" of AIG directors, said Nicholas Ashooh, a spokesman for the insurer.
"The events referred to should have been canceled, it's regrettable they weren't, but we've issued a policy canceling all such events and reviewing all expenses going forward," Ashooh said. He declined to comment on former CEO Sullivan's compensation.
AIG issued a statement yesterday saying the company would "fully cooperate" with Cuomo's office. "AIG's priority is to continue focusing on actions necessary to repay the Federal Reserve loan and emerge as a vital, ongoing business."
Cuomo also noted in his letter that an unnamed executive, "who was largely responsible for AIG's collapse" and was fired in February, was allowed to keep $34 million in bonuses. Cuomo said the executive also apparently continued to receive a $1 million a month from AIG until recently.
Joseph Cassano was head of AIG's financial-products unit until his retirement was announced Feb. 29. The business sold credit-default swaps, the contracts that plunged in value as the mortgage securities they guaranteed declined, causing more than $25 billion in write-downs at AIG.
A Cuomo case against former AIG chief executive Maurice "Hank" Greenberg, over an alleged multibillion fraud at the company, is pending in New York state court.