Nine who got biggest bonuses at A.I.G. pledge to give them back

Nine who got biggest bonuses at A.I.G. pledge to give them back
By Mary Williams Walsh and Carl Hulse
Copyright by The International Herald Tribune
Published: March 24, 2009
http://www.iht.com/articles/2009/03/24/business/bonus.php


NEW YORK: The New York State attorney general, Andrew M. Cuomo, said he had persuaded nine of the top 10 bonus recipients at the American International Group to give the money back, as the Senate retreated on plans to tax such bonuses.

Mr. Cuomo said Monday that he was working his way down a list of the insurer's employees, ranked by the size of their bonuses, and had already won commitments to pay back $50 million out of the total $165 million awarded this month. But in a reversal of the stand he took last week, he said he did not intend to release any names.

"If the person returns the money, I don't think there's a public interest in releasing the names," Mr. Cuomo said in a conference call with reporters.

In Washington, the Senate majority leader, Harry Reid, said that efforts to recover bonuses like the ones at A.I.G. through punitive taxes would be delayed. Other officials said momentum in Congress had slowed considerably, given misgivings voiced by President Barack Obama.

Mr. Cuomo said that he hoped eventually to recover $80 million in bonuses paid this month to A.I.G. employees in the United States. But he said that an additional $85 million had gone to people outside the United States and that he did not believe his office had the legal standing to pursue them.

That would appear to spare people in A.I.G.'s financial products office in London, the seat of the company's business in credit-default swaps — the derivatives that nearly sank the company and paralyzed the global financial system last fall.

"We have a very aggressive theory about our jurisdiction, but we don't have a theory that gets us to London," Mr. Cuomo said.

However, a person with knowledge of the investigation, who spoke on the condition of anonymity, said that two recipients in the London office had returned their bonuses voluntarily.

Mr. Cuomo said that of the top 20 recipients in the United States, 15 had returned their payments in full. The rest included people who refused, who were still reviewing their options or who had not been located, he said.

A spokeswoman for A.I.G., Christina Pretto, confirmed that employees had been agreeing to give back their bonuses. She said that there had also been "a handful of senior-level resignations" and that the company expected more.

This bore out the predictions of the A.I.G. chief executive, Edward M. Liddy, that if employees had to give back their bonuses, they would probably resign. In remarks last week to a Financial Services subcommittee of the House of Representatives, Mr. Liddy expressed concern that such resignations would make it harder for A.I.G. to wind down its portfolio of derivatives, worth $1.6 trillion. The company wants to minimize losses while getting out of the derivatives business.

Ms. Pretto said the company thought that so far the situation was manageable.

On the same day Mr. Liddy spoke, lawmakers began rushing to impose heavy taxes on bonuses paid to executives of companies receiving federal support. The House voted overwhelmingly Thursday in favor of a near total tax on such bonuses.

But after complaining last week that Republicans were blocking a similar bill in the Senate, Mr. Reid, Democrat of Nevada, indicated Monday that any action would be delayed.

"Republicans have asked for more time to study the legislation, and they're entitled to that," Mr. Reid said as he opened the Senate on Monday afternoon. Aides said the Senate could return to the bonus issue this week.

The Republican leader, Senator Mitch McConnell of Kentucky, said there were important reasons to put the brakes on the legislation. "This bill ought to slow down, and we ought to think about the ramifications of what we are doing," Mr. McConnell said at a news conference. "I gather from listening to the administration over the weekend that they are having some second thoughts about whether this is the right way to go."

After the House vote last week, the White House said that Mr. Obama looked forward to signing a final bill. But within hours, the president began to back away from that position, and in an interview Sunday on the television program "60 Minutes," he said he had not reached a conclusion. "We can't govern out of anger," Mr. Obama said.

Pressed about the constitutionality of a steep tax on bonuses, the president, who is a former professor of constitutional law, said, "Let's see if there are ways of doing this that are both legal, that are constitutional, that uphold our basic principles of fairness, but don't hamper us from getting the banking system back on track." He added, "That's why we're going to have to take a look at this legislation carefully."

Some officials said that the president's questions had created significant reluctance to act in the Senate, because lawmakers did not want to get too far out in front of the administration if the president ultimately was not going to back the tax.