By Jonathan D. Glater and Vikas Bajaj
NEW YORK: The New York State attorney general is demanding that American International Group recover bonuses and other payments from its former executives, lest he take formal action against the insurer.
Recently bailed out by the federal government, AIG is afloat only because of billions of dollars in government loans. With more and more taxpayer money committed, lawmakers and others have expressed outrage about high pay in general at financial firms and in particular at some of the perks that have come to light at AIG. The attorney general, Andrew Cuomo, made his demand in a letter to AIG's board, citing "unwarranted and outrageous expenditures" by the company as contrary to New York law. The letter, which described a lavish golf outing and an overseas hunting trip that cost nearly $100,000, follows other recent disclosures of excess by corporate America.
The threat against AIG, which Cuomo announced Wednesday, seeks to recover multimillion-dollar payments to Martin Sullivan, AIG's former chief executive, and Joseph Cassano, who ran the unit blamed for the losses that pushed the company to the brink of collapse.
"AIG's belief is that they had the party, and the taxpayers will have the hangover," Cuomo said, addressing a sidewalk throng of reporters, camera crews and tourists. He added that his office could bring civil charges if AIG did not work to recover big bonuses paid to executives.
His actions are reminiscent of the sweeping attacks on Wall Street by Eliot Spitzer, who was the attorney general before his brief term as governor, which ended in scandal.
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Public anger has grown the past few weeks over executive compensation. Lawmakers in Washington last week criticized the $442,000 that an AIG subsidiary spent on a weeklong resort retreat for top sales staff members within days of receiving government aid. The U.S. Treasury Department, in the midst of engineering a multibillion-dollar bailout of the financial industry, has announced that it would limit compensation to top executives whose companies took advantage of federal aid.
"People are outraged that these large businesses have shafted the shareholders - that's why were seeing this," said Kenneth Klee, a law professor at the University of California, Los Angeles. "And rightly so."
An AIG spokesman, Nick Ashooh, said the company had received Cuomo's letter and "will of course fully cooperate with the attorney general's office, and it will get the immediate attention of the board."
Two weeks ago, long before Cuomo's letter was sent, the company began reviewing all expenses and activities, Ashooh added.
Lawyers for Sullivan, who was ousted in June, and Cassano, who resigned in February, did not return calls Wednesday.
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