AIG Pulls Fast One -- "Cash Awards" Going To Managers

When you are a pro at a scam--the definition of "scam" also can be found under the term "insurance industry" -- you know how to try to pull a fast one. And AIG is trying to pull one -- under cover of the holidays. Check this out.

You may remember that AIG -- which is afloat only thanks to a bailout by you, the taxpayer, to the tune of $152 billion and counting--made a whole lot of public relations when its top seven executives agreed not to take bonuses this year.

Well, on the eve of Thanksgiving, obviously knowing the markets would be closed on the holiday and obviously knowing that just before the holiday few people would pay attention, AIG actually notified regulators that, well, yes, bonuses would be given out, as Bloomberg News and The Financial Times reports today:

American International Group Inc., the insurer that said yesterday it scrapped bonuses for top executives after a U.S. bailout, will still pay 130 managers "cash awards" to stay with the firm, including $3 million to retirement services chief Jay Wintrob.

Wintrob, 51, will get the "retention" payment in two installments, the first in April 2009 and the rest a year later, New York-based AIG said today in a regulatory filing. The firm previously disclosed the program in a Sept. 26 filing and said today that Wintrob and Chief Financial Officer David Herzog elected to get the payments four months later than planned.

"The expectation from the public and Congress was that they weren't getting bonuses, not that they'd be pushed off by several months," said David Schmidt, a consultant at executive pay firm James F. Reda & Associates. "That clearly violates the spirit of AIG saying they'll forgo their bonuses."[emphasis added]

From the FT:

However, the UBS news comes just a day after it emerged AIG, which has received more than $150bn in bail-out financing from the US government, would still pay 130 managers "cash awards" to stay with the firm. AIG disclosed the bonuses in a regulatory filing on the evening before Thanksgiving, a day when US markets are closed. The insurer had previously said its seven top executives would forgo their bonuses for 2008.

They just can't help themselves, can they? Call it "retention pay" or "cash bonuses" or some other euphemism -- but the fact is that your tax dollars are going to reward people who are lucky to even have jobs. There should have been a housecleaning that swept the entire top level of managers out on their asses for playing a role in the financial crisis that is hurting millions of people.

I have not seen this reported in other mainline traditional media. But, this is a scam.

Comments

[sposton]

That's small potatoes! They are using billions for acquisitions. See

Capital One buys Chevy Chase Bank: Another bailout freebie

http://www.rgemonitor.com/globalmacro-monitor/254674/capital_one_buys_chevy_chase_bank_another_bailout_freebie

There is only one reason banksters are doing this. It is because we let them!

[deepfreezevideo]

The hyper-wealthy are stocking up on the last bits of available wealth in their final preparation to jettison themselves into orbit above Plantation Earth.
When the hyperinflation rates of 100 and 200 percent finally hit all that will be left are jobs done by weakened peasants who don't ask questions as they punch the buttons and charge up the robots that keep the plantation liveable for the elites.
And as they return from the daily grind as caretakers for the super-rich they will get to fight each other for scraps of meat in the streets much to the continued amusement of the robber barons.

We are witnessing the last great suck at the straw before the financial vacuum causes the straw to collapse.

[MarkMatson1]

Cash awards are bonuses you AIG idiots. But what do you expect? This is what happens when the federal government subverts free markets. The ultimate economic justice only comes from free markets. The guys that bankrupted the company should already be on the street with a tin cup, not getting bonuses to stay! Accountable government is an oxymoron. How could we ever expect them to bring accountability to the business world? Only the government would come up with a plan to give money to the least fit business models. Don"t get me wrong. I am not advocating it. But shouldn"t they give assets to the best and most profitable models? Wait, that is what free markets to when they are left alone. " Mark Matson

[toysarefun]

Anyone who needs a bailout, does not need my business any longer. Expect to see bailed out companies fail eventually anyways.

[Lulubelle1]

Dealing with the leaders of these companies is more than a little like dealing with despotic rulers of middle-sized nations.

If we "appease" them with money and other aid, they still trash us behind our backs. It buys us only temporary relief, a sort of ongoing blackmail that doesn't really advance any agenda. However, if we withdraw all aid and punish them with regulations/requirements/sanctions, the ones who suffer are the "little people" and we still end up losing out.

Meanwhile, the leaders still end up in cushy palaces, eating well, and traveling in private jets.

I am really, really starting to hate these "captains of industry," CEO's and senior leadership teams. They seem pretty oblivious to the fact that there are a great number of people out here who are equally bright, equally educated, and perfectly able to read a balance sheet and make tough calls. Yet they seem to consider themselves the only ones who can steer their ventures out of the ditch. Or, perhaps, they're determined to get as much out of it as possible, and d*m* the consequences.

Hmmm... delusional, megalomaniacal, greedy, power-hungry, ambitious... Yup. Sounds just like a petty dictator.

[milton.is.real]

This is why we are in this mess. We need to stop this greed. They need to be fired.

[dreffein]

If the author had ever been employed in a major business that was going through either a sale, sell-off of some assets or bad times, he would know that retention bonuses are common - otherwise you lose many of the key players who will go to other firms. You need some continuity to keep the business running. In the context of what AIG is going through, this type of plan is a necessity.

[StevenevetS]

Surely you jest, Dreffrein. There is absolutely no such thing as an indispensable employee. And especially in cases of enormous incompetence and abuse.

There should have been a total house-cleaning of the top echelons of AIG.

[dreffein]

I don't jest about the practice. And, you're right - no one employee is indispensable. But the loss of ALL management would create an even bigger crisis. The major decisions that have driven the financial services industry into the gutter were made by a few individuals in each firm - you're right - those people should be terminated.

[kennyh]

...and why do 'we the people' want to retain this bunch of incompetents who got us into this mess. Because, that is the way it has always been done. To hell with the retention bonuses. How about dunking them in the retention pond?

[kanester]

Ding! The landscape has changed. Try NOT offering these topline managers retention bonuses and see how many leave. And go, where?

[dreffein]

In case you're unaware, there are 1000s of financial services firms.

[bbridges1962]

That would save you from having to fire them.

[beartrack]

What a bunch of bull ! "Common practice" of theft from investors, cooked books, fraudulent loans, and much more is what all of these people did. No bonuses and most should be fired and prosecuted.

[ChickyLaLa]

dreffein, I have been with many companies that utilzed the retention bonus plan with great success. It is normally employed during times of layoff to assuage those valued/key employees to stop them from jumping ship to another company/competitor. The very large difference here is that these 130 top level managers were part and parcel contributors to the downfall of AIG and as a result should be summarily fired! I feel confidetn that there are many people within the ranks at AIG that are quite capable of keeping the CO afloat, hell they are doing that already!

[lesterbud]

Gee Dreffein - getting hit back hard on this one eh?
"Common Practice" it is and I have received them myself.
However in this case I have, in fact, given my hard-earned money to this company for the sole purpose of keeping it solvent, at least for a time, so as not to further damage our economy. This company was admittedly mismanaged. But it was deemed to be so strategically important that it was "in my best interest" to loan them some cash.
That should mean implicitly that my money will not go to:
1) Financial rewards for those implicated in the failure of the company in any way
2) Parties, perks, planes, payoffs or prostitutes for those executives
I would agree to them using my money to hire new talent, provide better training for employees and for promoting deserving people within the company. But this is not a time to celebrate at AIG. It is a time to reflect sorrowfully on past behavior and to quickly right the company.

[booker52]

This is such crap. The congress sends the big 3 auto makers away telling them to come up with a plan to get $25 billion and they actually make a product. This outfit make nothing you can see, feel or touch and they get billions more and they are still ripping off the American public and the congress is letting them. Their CEO's should be made to come before congress and answer for their actions and or return the money.

[Cathy22]

I agree. At least the auto companies make a product and employ hard working Americans. The AIG bailout funds should be rescinded - then $25 billion could go to the auto companies and the rest can go to all of us individual Americans that are suffering because of the greed at places like AIG.

[Eastexgal]

Cash awards to stay with the company??? When thousands are loosing their jobs and employment harder to find- just where would these managers go?
Auto makers are about to ask the unions to take a pay cut so they can qualify for the bail out money. Why shouldn't these managers have to do the same?
Companies all over the place are closing whole divisions just so they can keep the company open. These managers should feel lucky they even have jobs.

[bioluminescence]

It took 41 U. S. Presidents to run up about $8 trillion in national debt. But it took only two, both named Bush to run up another $2 trillion on their own just from bailing out the banking industry. Senior Bush continued the de-regulation begun by Reagan and presided over a $1.2 trillion public bailout. Now Junior Bush follows with a $700 billion bailout with Citicorp waiting in the wings, palms faced upwards.

The banking association should create an honorary League of Presidents who've helped them the most. They can call it the Bush League.

[lesterbud]

Good history!
I am sure the Bushes can reach $3 Trillion if they try hard.

[hollybork]

This is very stupid of a company that was once admired and respected for its business acumen. To give their retirement manager 3 million raises the question of how he has managed the retirement funds and how many people are going to be forced into early retirement?

I am writing to my Senators and Congressman to complain that this company the taxpayers just bailed out is run by venal, self serving village idiots, who are paying off their buddies for god knows what with public funds. Simply, stunningly outrageous.

[enaid]

I wrote letters and made phone calls saying a big fat no to the bailout. Let them fall on their faces. I'm still saying no and still I'm being forced to pay for their excesses and bad business judgement and now "cash awards" to the same blunderers. The Somali pirates could learn a thing or two from Paulson et al -- how to get the "job" done without leaving the spa. Ain't it fun living in a country where we encourage "free" enterprise.

[deepfreezevideo]

Where do you think the Somali pirates got their training?
Take a look at the business sectors in Mogadishu that are connected with them.
It's a real eye opener.

[Sapphdia]

I'd like to hear more about this.

[negogato]

not a in writing, that promise not to take the money?

[seanseamour]

Unacceptable - more Republican trickle-down feed the top so some crumbs may filter down to the bottom, surely someone is thinking that to continue feeding Wall street will benefit main street, as passeist and now disproved that economic theory may be, but to do this with taxpayer money is tantamount to corruption. I still do not understand why there appears to be no effort to seek accountability for the mess we are in, perhaps because the general public does not yet realize how grave the situation is, there is no bottoming out for optimism, it is called depression.

[unity13]

It was not the goal of the bail out to socialize the risk and privatize the profits for the organizations that have benefitted from tax payer relief. I am holding the oversight committee responsible for ensuring that AIG's recent attempt to simply delay their outrageous bonuses instead of eliminating them does not go unchallenged. It is very clear that any company so poorly managed that they require tax payer support for their very survival can not possibly reward their negligent, inefficient and even criminal executives.

I am the sole proprietor or my own business which has been successful even in turbulent times. As a high school graduate, if I can figure out how to adjust my business plan to remain profitable in an ever changing market, surely the Harvard MBAs at AIG and the financial institutions can make appropriate adjustments in the face of a changing economy.

I've never been in favor of trying to legislate common sense, but in light of the fact that deregulation and lack of oversight helped pave the way for corporate greed to usurp the common good, I would like to propose the following:

Executive bonuses cannot exceed 1% of the net corporate profits. Any company operating with a negative income to debt ratio can not pay the executives with cash bonuses.

It is incomprehensible for law abiding tax payers to have to foot the bill to reward undeserving executives who failed their own employees and our country.

[DragonFly]

Excellent response, and I do hope others wake up to this horrendous scam being perpetrated on taxpayers.

Any reward whatsoever, should be eliminated altogether, without question.

[my2cents1972]

great suggestion, post it on change.gov

[StevenevetS]

unity13 said:

"Executive bonuses cannot exceed 1% of the net corporate profits. Any company operating with a negative income to debt ratio can not pay the executives with cash bonuses."

I agree wholeheartedly!

Senators, Congressmen, listen up!