Black Hole AIG Needs Another $10 Billion

They just doubled the top 130 executive/manager salaries for "retention" purposes

By Hugh Son

Dec. 9 (Bloomberg) -- American International Group Inc., the insurer whose bonuses and perks are under fire from U.S. lawmakers, offered cash awards to another 38 executives in a retention program with payments of as much as $4 million.

The incentives range from $92,500 to $4 million for employees earning salaries between $160,000 and $1 million, Chief Executive Officer Edward Liddy said in a letter dated Dec. 5 to Representative Elijah Cummings. The New York-based insurer had previously disclosed that 130 managers would get the awards and that one executive would get $3 million.

“I remain concerned, as do many American taxpayers, that these retention payments are simply bonuses by another name,�?Cummings said in letter responding to Liddy.

AIG, which received a U.S. rescue package of more than $152 billion, has been criticized for saying it will eliminate bonuses for senior executives while still planning to hand out “cash awards�?that double or triple the salaries of some managers. The payments are designed to keep top employees at AIG while Liddy seeks to sell units and pay back the federal government, which owns 79.9 percent of AIG.

“We are indeed fortunate to have benefited from the assistance extended to us by the U.S. government and we are grateful for the support of American taxpayers,�?Liddy wrote. “We would be doing a disservice to the taxpayer -- and would place AIG’s asset divestiture plan at risk -- if we did not act decisively to ensure that our key employees remain.�?

Congressman Wants Answers

Cummings, a Maryland Democrat on the House Committee on Oversight and Government Reform, asked AIG to disclose how much each of the 168 recipients made in salary, bonuses and other kinds of pay. In a letter dated today, Cummings also asked for an estimate of what AIG would have spent on employee compensation in 2008 had the firm not sought U.S. help, compared with what it expected to spend.

AIG is selling businesses including its U.S. life-insurance and retirement-services operations. Collectively, the assets for sale equal “almost 65 percent of our company and employ approximately 70,000 people,�?Liddy wrote. Total employment is about 116,000, he said.

AIG spokesman Joe Norton declined to comment. Another AIG spokesman, Nicholas Ashooh, previously said that many AIG managers have lost their life savings.

AIG’s managers have overseen a record $37.6 billion in net losses so far this year. Cummings has called for Liddy’s resignation and said AIG should provide names of those getting retention pay and explain why the awards are needed. Firms accepting taxpayer money shouldn’t enrich employees, he said.

‘Flight Risk�?

Keeping the managers is necessary to maintain credit ratings and meet requirements in some reinsurance agreements, Liddy wrote. AIG disclosed the initial list of 130 managers in a September filing without saying how much most of the recipients will get. Another 38 people were added “subsequently,�?according to Liddy’s letter, which didn’t disclose the new recipients or say when they had been added.

The list was expanded so AIG can retain people with “key client relationships�?and who have a high “degree of flight risk,�?Liddy wrote. He cited their “deep experience, extremely valuable business relationships, and unique ties to the many local communities where they live and work.�?

Recipients will get the payments in two installments starting this month, while 13 top managers agreed to delay the first award until April, Liddy said in the Dec. 5 letter.

To contact the reporter on this story: Hugh Son in New York at [email protected]