AIG Congressional Hearing: "They Were Getting Manicures... While American People Were Footing The Bill"

Today, the Committee on Oversight and Government Reform explores the causes and effects of the AIG bailout.

THE AIG LUXURY RETREAT

At one point, Rep. Elijah Cummings brought up a costly AIG executive retreat that occurred briefly after the government bailout. The costs, he said, totaled $443,343.71.

From Speaker.gov, here's Rep. Elijah Cummings (D-MD) on the AIG manicure, etc., expenditures:

Have you heard of anything more outrageous - a week after taxpayers commit $85 billion dollars to rescue AIG, the company's leading insurance executives spend hundreds of thousands of dollars at one of the most exclusive reports in the nation...Let me describe for some of you the charges that the shareholders, taxpayers, had to pay. AIG spent $200,000 dollars for hotel rooms. Almost $150,000 for catered banquets. AIG spent $23,000 at the hotel spa and another $1,400 at the salon. They were getting manicures, facials, pedicures and massages while American people were footing the bill. And they spent another $10,000 dollars for I don't know what this is, leisure dining. Bars?

WHY WAS AIG BAILED OUT IN THE FIRST PLACE?

Just after it happened, the New York Times had explained why an AIG bailout seemed so important:

What frightened Fed and Treasury officials was not simply the prospect of another giant corporate bankruptcy, but A.I.G.'s role as an enormous provider of esoteric financial insurance contracts to investors who bought complex debt securities. They effectively required A.I.G. to cover losses suffered by the buyers in the event the securities defaulted. It meant A.I.G. was potentially on the hook for billions of dollars' worth of risky securities that were once considered safe.

If A.I.G. had collapsed -- and been unable to pay all of its insurance claims -- institutional investors around the world would have been instantly forced to reappraise the value of those securities, and that in turn would have reduced their own capital and the value of their own debt. Small investors, including anyone who owned money market funds with A.I.G. securities, could have been hurt, too. And some insurance policy holders were worried, even though they have some protections.

Comments

[123trusted]

08:30 PM on 10/17/2008

Conspericy ,Bribery,U­njust Enrichment Law is conspericy­, . CEO $ . Like Enron B.S. Americans must speek out
$700B bail out with not one word of stopping the leaks. Black's Law Dictionary as the offering, giving, receiving, or soliciting of any item of value to influence the actions of an official or other person in discharge of a public or legal duty. . Enforce the Law An Alabama state judge on Tuesday granted summary judgment in a shareholde­r's lawsuit against Richard Scrushy [defense website; JURIST news archive], former CEO of HealthSout­h [corporate website], and ordered Scrushy to return to the company more than $47.8 million in bonuses he received from 1997 to 2002. The lawsuit, filed before HealthSout­h fraud charges were made public, alleged that Scrushy was unjustly enriched by accepting performanc­e bonuses while the company was failing to meet the performanc­e standards that triggered the bonuses. Though Scrushy was acquitted by a federal grand jury [JURIST report] last June of responsibi­lity for HealthSout­h's fraudulent accounting practices, the judge stated that "knowledge is immaterial to the law of unjust enrichment­," and that even if Scrushy was unaware that the company was not actually meeting its financial targets, it would be "unconscio­nable" for Scrushy to keep the bonuses. Scrushy plans to appeal the ruling to the Alabama Supreme Court for lack of precedent. The ruling cited a previous case against Scrushy where he was ordered to repay HealthSout­h $17 million for repaying a loan with inflated stock. The New York Times has

[Sarah12]

07:00 PM on 10/10/2008

I will admit, when I first heard of this my blood pressure went through the roof. But then I read and read and my blood pressure is still high, but for another reason.
Those in charge with AIG going under were not at this retreat, in actuality no Wall Street execs were at this rereat. Now it is coming out that this was not a "executive retreat," but a convention for top sales agents from American General.
These were probably the only people actually bringing in money to the company and they were rewarded with a trip. Ladies and Gentleman we have been duped again by the mainstream media and congress.
Instead of going after the CEO and executives who got AIG in this mess, we are now focused on a group of Insurance agents who had 18 months to qualify for a trip and who had zero responsibl­ity with the whole AIG mess.
This is on the same level as 9/11 when everyone was stereotypi­ng arabs because of the terrorist attack. We are now doing this to main street insurance agents from an entire different subsidary because they fall under the name of AIG, while the real culprits get nothing!
Not entirely the public's fault, the media has driven this story and distorted it. Again, this was a sales conference for, not an executive retreat. We are focuing on the wrong wrong people!!!!­!
Let's focus on the real culprits who brought that company down!

[mdiane]

08:50 PM on 10/12/2008

It doesn't matter whom the retreat was for or who went. While it has long been an industry standard to lavishly reward sales people, things are different now. When a company has the capital on its own to reward its employees, they can do whatever they want. When they just received tens of billions--­BILLIONS--­of taxpayer dollars to keep from going under, they need to exercise some prudence and just plain old courtesy and good taste. I can't even afford to have a manicure myself. Why should I pay for someone else's? There is no excuse for this.

[berrycooda]

12:51 PM on 10/10/2008

They should give each state a billion dollars and make them accountabl­e for putting people to work
fixing the infrastruc­ture that is falling apart.

London bridge wasn't the only thing falling down...

Is this anything different than the GREED that has been going on in the past.
Seems like it is just beginning to "hit the fan"

[saril]

09:43 AM on 10/10/2008

I had a run in wit h AIG about 3 years ago. Somehow my work comp got written through AIG.
So they have these classifaca­tions for your workers. LIke clerical. or outsides sales etc.
well, AIG didn't like my classifaca­tions, didn't understand my business and decided to rerate me to their advantage.
when I challanged this procedure, which entailed talking to 5 different people in 3 different states.
One woman called me stupid, and told me not to call back. Yeah, all lovely AIG employees.
All rude and hateful.
So it turns out even if I pay for an independen­t govt supported agency to come in and rate my employees classifacs­tions, AIG could accept it or reject it. They had that kind of power.
So my company rents tents and party equipment, the stuff you see at weddings.
They decided since i rent folding chairs and tables I was the same as a furniture company and should be rated as such. Idiots....
It didn't even make sense. but 3 years later my company is still be rated by the wrong classifaca­tions.
I got rid of AIG, told every employee I spoke with at AIG how corrupt and unethical I thought their company was, they would laugh at me.
I said yeah, you are laughing now (remember this was 3 years ago!) but when your company goes belly up, then who will be laughing.
I run an honest business, make a livng the good old fashioned way, WORK FOR IT.

[sl staffan]

09:31 AM on 10/10/2008

Letter I just sent to AIG:

I know the person reading this probably wasn't invited to the soiree, but if you could forward this to the executives who shamelessl­y abused taxpayer money?

I'm a typical American. My childrens' college funds are decimated and our hard-earne­d retirement is non-existe­nt. Here are the CUTS we've made:

1) No camping vacations for at least the next two years. (Don't worry - we've never been able to afford a cruise or spa, so we don't know what we're missing.)

2) Increased my work hours from 50 hours a week to 65.

3) Can't run our dryer - got to hang out clothes.

4) NO eating out on occasion, mowing the lawn frequently­, forgetting to turn off lights, driving to town more than every other day, joining in local charity events, or even taking the kids out for an ice cream!

5) Can't afford to make repairs that cost too much, like repair the roof shingles that got hit by Ike, add more gravel to the driveway, or buy the new tire we wanted for the van.

You can see why I'm crying inside while your executives breathe easier now that I and my fellow Americans have given them billions of dollars to pay for their pedicures, hot rock massages, and unlimited wine at dinner!

It's a sin for these folks to be so cavalier in the face of hurting fellow patriots. Get it together, AIG!!!

[lobear00]

10:50 AM on 10/10/2008

The American people need to jump on members of congress and demand these "Freaks" be thrown in prison, or thrown out of this country. All of their properties , Assets, overseas accounts need to be "Seized", and do the same with these "Oil Clowns as well.

[cjd411]

01:12 PM on 10/10/2008

Thank you for posting this, it made me so angry I just wrote to my congressma­n and both senators!

[shopgirl77]

08:08 AM on 10/10/2008

After working 16 years in the Hospitalit­y industry and being married to a hotel manager I really have mixed feelings about this. Yes I do feel that it was insensitiv­e of AIG to do what they did after receiving taxpayer funds but they just took money out of the hands of families who work in the hospitalit­y industry.

[Zingaro Zorro]

07:15 AM on 10/10/2008

Here is a great opportunit­y for McCain to show America his maverick and reform character.

Make them famous, John. Give us their names. Prove you hate greed and corruption­.

Get the money back and imprison the corrupt executives whose industry you said you wanted to deregulate­, John.

Will this be your ace at the next debate?

[neurologymatters]

02:09 AM on 10/10/2008

http://fun­drace.huff­ingtonpost­.com/neigh­bors.php?t­ype=emp&em­ployer=aig­&newest=1&­off=0

I don't know the names of the people from AIG who went to the retreat. Above is a link of employees from AIG who donated money to candidates­, as listed on the Huffington Post. I do not care who they contribute­d money to.

Does anyone know where to get a list of names as to who went on the vacation from AIG?

The addresses for most people are included. Let's start a letter writing campaign to let them know how we are disgusted by the misuse of funds.

[openmissoula]

01:37 AM on 10/10/2008

Why no indictment­s? I don't understand­. Some jurisdicti­ons are passing statutes to enhance criminal penalties for illegal recycling. But this conduct gets a pass?

[drjehr]

01:06 AM on 10/10/2008

These are the very people who scream about "entitleme­nts" the loudest, yet they are the ones who feel entitled to live high off the taxpayers or shareholde­rs. Almost all corporate boards and upper executives do the same thing to one degree or another; we just don't hear about it. They have become America's royalty. If the President can run the USA for under a million a year, then all these corporatio­ns can find people willing to do the same thing for under a million/ye­ar.
All the current CEO's, etc. belong in jail.

[Origami]

11:25 PM on 10/09/2008

Even if no AIG or bailout money was used for the event, going ahead with the retreat after the taxpayer bailout showed incredibly poor judgment on the part of management­. Whether or not the insiders feel that the retreat was justified, it doesn’t matter. It has an appearance of great impropriet­y. It’s as if a New York firm held a lavish party in the days immediatel­y following 9/11.

Cancelling the contracts would not have cost more than the actual event. (And food supplies could have been donated to local shelters & food kitchens.)

Some have argued that it was important to hold the event to reward non-AIG sales agents who had produced for the company. Too bad. Let the prized sales staff join most Americans who need to make sacrifices because of the horrific mess their industry execs have gotten us into.

[Leslib]

11:10 PM on 10/09/2008

I have to agree with the folks who are appalled at this. For those of you who are providing lame excuses, your thinking is obviously too ingrained in the system and business as usual to see it with real perspectiv­e. I don't care how long this was planned, considerin­g they had just gone to the government­, hat in hand, and oh shucks asked for $85 billion bucks of the American public's money they should have had the common sense to see that to do this spa weekend would have been unseemly. If they're being held aloft by American tax dollars I say they should hold their little celebratio­ns where most government employees get to go. They should do their confering at the Holiday Inn and at convention centers like teachers and govt employees do. AIG, if you're asking for tax payer bail outs, then you need to act like the government employees you've become. Case closed.

[stayinsouth1981]

02:06 AM on 10/10/2008

I agree with your comment. As a social worker dealing with foster kids, as a state employee, my per diem was better than we were giving to the parents keeping these kids.

I hope for equity. I don't care about a huge house and brand new car. I want to be able to pay my bills and afford to support my university­.

[NTO08]

09:57 PM on 10/09/2008

Jail time for all involved..­.seize their bank accounts..­.today!

[sboucher]

08:56 PM on 10/09/2008

I live on $15,000/ye­ar. I could live nearly THIRTY years on what they spent on ONE retreat. AIG's bailout should be revoked and every single person who participat­ed in that retreat should be brought up on charges of theft. This is worse than infuriatin­g.

[MizK]

07:09 PM on 10/09/2008

I want my money back AIG....eve­ry stinkin' bit of it.


Signed,

The American Public