After Bailout, AIG Executives Head to Resort
UPDATED: 11:31 a.m.
Less than a week after the federal government offered an $85
billion bailout to insurance giant AIG, the company held a
week-long retreat for its executives at the luxury St. Regis
Resort in Monarch Beach, Calif., running up a tab of $440,000,
Rep. Henry Waxman (D-Calif.) said today at the the opening
of a House committee hearing about the near-failure of the
insurance giant.
Showing a photograph of the resort, Waxman said the
executives spent $200,000 for rooms, $150,000 for meals and
$23,000 for the spa.
"Less than a week after the taxpayers rescued AIG, company
executives could be found wining and dining at one of the most
exclusive resorts in the nation," Waxman said. "We will ask
whether any of this makes sense. "
The committee will ask the company's executives about their
multimillion-dollar pay packages -- some of which they
continue to receive -- as well as who bears responsibility for
the company's high-risk investment portfolio, which led to its
near collapse just weeks ago.
"They were getting their manicures, their pedicures, massages,
their facials while the American people were paying their
bills," thundered Rep. Elijah E. Cummings (D-Md.), of the
executive retreat at the Monarch Resort.
The House committee, which took on executive compensation
at bankrupt Wall Street firm Lehman Brothers yesterday, has
received "tens of thousands" of pages of documents from AIG,
Waxman said.
Those documents show that as the company's risky
investments began to implode, the company altered its
generous executive pay plan to pay out regardless of such
losses.
AIG lost over $5 billion in the last quarter of 2007 due its risky
financial products division, Waxman said. Yet in March 2008,
when the company's compensation committee met to award
bonuses, Chief Executive Martin Sullivan urged the
committee to ignore those losses, which should have slashed
bonuses.
But the board agreed to ignore the losses from the financial
products division and gave Sullivan a cash bonus of over $5
million. The board also approved a new compensation contract
for Sullivan that gave him a golden parachute of $15 million,
Waxman said.
Joseph Cassano, the executive in charge of the company's
troubled financial products division, received more than $280
million over the last eight years, Waxman said. Even after he
was terminated in February as his investments turned sour, the
company allowed him to keep up to $34 million in unvested
bonuses and put him on a $1 million-a-month retainer. He
continues to receive $1 million a month, Waxman said.
Waxman also looked skeptically at the executives' defense that
the troubles in the business had to do with larger economic
forces and not their own bad decisions.
When a former AIG auditor, Joseph St. Denis, expressed
concerns, Cassano told him "I have deliberately excluded you
from the valuation ... because I was concerned that you would
pollute the process," according to Waxman.
St. Denis resigned in protest.
PricewaterhouseCoopers, AIG's auditor, told the company in
March 2008 that the "root cause" of AIG's problems was that
people assessing risk did not have enough access to the
financial products division, where the risky investments
originated.
Waxman further suggested that Sullivan had deliberately
misled investors.
On Dec. 5, 2007, Sullivan expressed confidence to investors.
But a week before, PricewaterhouseCoopers warned Sullivan
that the company "could have a material weakness relating to
these area," committee members said.
-- Peter Whoriskey
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