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March 18th, 2009
07:31 AM ET

Read what AIG says about the bonuses

[cnn-photo-caption image=http://i2.cdn.turner.com/cnn/2009/US/03/15/AIG.bonuses/art.liddy.afp.gi.jpg caption="In a letter to the White House, AIG Chairman Edward Liddy, shown here in December, vows to curb bonuses."]

Joe Johns | BIO
CNN Correspondent

We've received a couple of documents from AIG about the bonuses.

This first letter is from AIG chairman Edward Liddy, to Treasury Secretary Tim Geithner about the bonuses.

The second letter is not as well-known. It is a so-called "white paper" from AIG explaining, among other things, why it had to pay the bonuses. Its pretty interesting stuff –the white paper explains AIG’s concerns about getting sued for double damages in Connecticut, fears of creating a cross default that allows AIG’s counterparties to back out of deals and more.


Filed under: AIG • Economy • Joe Johns
soundoff (26 Responses)
  1. David Shell

    I'm not an attorney, but as I listened to a report about Congress trying to go back and undo the law concerning these AIG bonuses it struck me that this could be an "ex post facto" law and thus unconstitutional. Article I Section 9 is clear about this, as is James Madison in Federalist 44, concerning application of such laws in both criminal and civil matters.

    March 19, 2009 at 1:38 am |
  2. Neo

    Yawn. AIG needs to learn a new word: FAIL! Outside of that the Gov't is not responsible (legally or otherwise) to pay out YOUR policies. IF your employee wants to sue you for failing to pay RETENTION benefits, then let them sue you. If it warrants countersue them for putting your company at a risk. I'm not a lawyer but if the policy is a retention policy then you are essentially paying your BEST employees to stay with the company & not go to the competition b/c they aid in profiting and sustaing your business. However, IF these employees aren't making the company profitable, guess what? they are not retainable. This seems like an internal problem still. AIG shouldn't have asked for a hand out nor received one.

    March 18, 2009 at 4:25 pm |
  3. Isabel, Brazil

    Bonus – the dictionary definition

    1. Something given or paid in addition to what is usual or expected;

    2. A sum of money or an equivalent given to an employee in addition to the employee's usual compensation;

    3. A premium, as of stock, that is given by a corporation to another party, such as a purchaser of its securities.

    [The American Heritage® Dictionary of the English Language]

    Ok! Was already foreseen in the contract that the executives win bonus. But why they were entitled to this bonus?
    This is an outrage to all who suffer the consequences of economic crisis.

    March 18, 2009 at 3:59 pm |
  4. Isabel, Brazil

    The chairman of AIG, Edward Liddy, was required to pay bonuses to executives because everything was right in the contract. But with public money?

    What we actually are discovering is that the financial market was completely crazy. A large casino, without rules and with little supervision.

    March 18, 2009 at 3:45 pm |
  5. Lynnette in Texas

    I agree with Joy (first comment on this story). If the people who received these bonuses had any kind of common decency, they would return the bonuses voluntarily.

    KAZ, however, needs to do some more reading before blaming this particular debacle on the administration. The biggest part of funds to AIG came from the FED in September last year – not from the Obama White House, not from Congress, from the FED, who doesn't answer to the administration in any real way. Plus, the TARP was passed during the previous administration, so if you want to blame anyone, blame them, but even they don't deserve all the blame for the AIG mess.

    March 18, 2009 at 1:08 pm |
  6. Paul

    Good information!
    Change we the people to….
    “We the unseen people” Perhaps it will take an AIG “Bonus” situation to stir “We the People” into action. Tim Geithner cannot sell the reimbursement to us he is part of the problem. AIG has a 50 to 200 Trillion dollar derivative problem. Paulson left his GS chairman job in 2006- 2008 paying him millions of dollars to become treasury secretary paying him $150000. WHY? The financial few knew that the entire system was crashing in 2007 they needed someone to rescue GS and other financial instructions thru taxpayer dollars. Just look at Bernacki and Paulson rescue plans in 2008 the Fed spent Trillions and it went virtually unnoticed and the FED refused to tell “we the people” where the money went. The Treasury spent Billions and this is where we focused our attention. The Trillions given to AIG and other financial institutions went to GS and other foreign entities to build their personal profit while the taxpayers 401 became 101. We the people have no representation in congress or the presidency in these financial matters. We can vote them all out, republicans and democrats and start new. Have term limits and replace them after two terms. They call this a populist movement perhaps we need one. I wonder if we formed a “WE THE UNSEEN PEOPLE” POPULIST MOVEMENT WITH NO REPUBLICAN, DEMOCRATS, LIBERAL OR CONSERVATIVE LABELS to present our viewpoint how many would sign up?

    March 18, 2009 at 12:46 pm |
  7. LeenieJ (Canada)

    imho,

    With 80% ownership, transparency and closer scrutiny are easily done. Why not just "chapter 11" AIG and restructure it?–including cancelling/modifying contracts–according to US laws. AIG saying we'll do better from now on is unacceptable; just as it would be if someone had committed a heinous crime and simply apologized for it; some penalty must accompany the admission.

    AIG is essentially a monopoly. This smells like extortion.

    The Repub/conservative response in both our countries is very interesting for several reasons:
    a. The Repub/conservative element want President Obama (actually, the USA) to fail. their motto is "just say no".

    b. Bush/McCain/Republicans fought so hard to have the first $170B go ahead quickly w/o "preconditions"; issued the monies w/o "preconditions" and now are attempting to blame the new admin, instead of the previous administration and taking responsibility themselves as lawmakers, for not having "preconditions" in the midst of the bailout process.

    c. The appointment process has been slowed/bogged down by the Repubs/conservatives (as perceived from your reporting), resulting in less eyes able to scrutinize and effect the "handouts" to big business.

    d. A newer economic reality trumps the year old contract for payment of "retention fees". As well, since some of the recipients have left the company, isn't AIG absolved of its contractual obligation since those ppl were not retained?

    e. Our very unpopular Canadian conservative minority govt (who got 35% of 58.8% cast ballots out of all possible ballots–41.2% didn't vote) revealed that we are in a "synchronized global recession" during the press conference w/President Obama when he visited our country. This suggests some sort of economic manipulation or at least an attempt to benefit at the respective country's expense (allowing/encouraging loss of jobs by delaying/"pork-barrelling" stimulus and other tactics) by "synchroniz[ing]" recession for personal political/related gain: a sort of "political" Disaster Capitalism.

    March 18, 2009 at 12:31 pm |
  8. David Patnode

    Those within the ranks of AIG who conspired to accept help from the Federal Govt' and then divi up that money among themselves and their staff are guilty of Fraud and Embezzlement. No more excuses ,no more stories ,no more smoke screens. give them all till Friday to surrender themselves and all of the cash in lue of prosecution. If they don't 'round the all up and lock them away. This country has spent so many years being spoon fed corruption and greed that we don't even react to it any more, like we almost expect it. I say enough, its time to adopt a zero tolerance policy on Corruption both in business and in politics. Get caught with your hand in the cookie- jar go straight to prison. End of story.

    March 18, 2009 at 12:16 pm |
  9. RLWellman

    The sad thing about all of this. What kind of bonuses would the executives have got if the company made money? I'm not against bonuses, but not if I'm the one that has to pay them. I want my money back. Where is my bonus for doing good?

    March 18, 2009 at 11:41 am |
  10. StevG

    Since we own 80% of the companys stock, lets call a stock holders meeting, vote to fire all the people who received bonuses, and other
    management. (8%unemployment to fill jobs). Tear up all contracts and bi-laws, and write simple no bull contracts with simple rules and guide lines, and lead the company back to profit , sell it ,and get our money back.

    March 18, 2009 at 11:36 am |
  11. Melissa

    This can't be defended. The only word for it is "greed" and AIG is fully to blame for it. Bonus' are not wages. Bonus' are given out when the company profits. No profit, no bonus.

    March 18, 2009 at 11:29 am |
  12. Sharon the Bloggerqueen

    Thank you, Anderson, for presenting the "other side" and some reasoning behind these outrageous bonuses for employee who clearly do not deserve them in our eyes.

    Considering that AIG entered into these ridiculous contracts prior to their bailout says a lot about why their business is failing in the first place. However, they are essentially holding the American people ransom and if we do not pay the piper, we'll all go tumbling down.

    I would be interested to know when and who created this bonus plan to begin with. It is suspicious and clearly devisive.

    I pray that this boot strap period for the American people and, in fact, many parts of the world, is short and not too painful.

    Thank you,
    Sharon the Blogger Queen

    March 18, 2009 at 11:20 am |
  13. MARIE Ann GLINSKI

    i think that aig, berneyand all the ccos from the othercompanys that got money from us and the oil companies were making so much money by the wall street sepectelators so all these storng ccos and huge kitting sceam started to fall apart when they were made to lower gas prices so they paid money in bonuss they coulnot mantain the giant kite sceam and it all fell apart thus the stock market fell these people are the stock market thats why the market goes down every time congress or obma trys to stop or interfer will them making money they lead the government is chasing their tails

    March 18, 2009 at 11:19 am |
  14. Chan

    Why would they even want to keep the people who tanked the company in the first place?

    March 18, 2009 at 11:11 am |
  15. Alex: Baton Rouge, LA

    Bonuses aren't deserved in a company that was bailed out by government money. AIG ought to pay the amount of the bonuses in full return or the government should tax these bonuses back.

    Even Republican officials are complaining about this, and they usually stand next to big business. When the Republicans go against the companies that they support, something drastically wrong has happened.

    March 18, 2009 at 11:09 am |
  16. KAZ

    Actually I think this is juvenile. No one hands over 30 billion dollars after all that has happened. they are under a microscope and the Congress and the Treasury should have known. If they didn't shove the Tarp down the congress throat and they didn't even read it.!!!!
    provisions would have been made and this would have never happened. I blame the adminstration. !!!!! We can't keep rushing this government through some sort of fast track. Mistakes will be made.
    We are now just learning of many polocies that were stuck in this Stimlulus bill. Not spending which was bad enough. But Policy !!!
    That should have been discussed and not stuck in a bill.

    March 18, 2009 at 11:01 am |
  17. Gary Hunnicutt

    When failure is rewarded, it only produces more failure. What we are seeing today is the result of this misguided corporate policy.

    March 18, 2009 at 10:51 am |
  18. Paul

    "We the people" Perhaps it will take an AIG "Bonus" situation to stir "We the People" into action. Tim Geithner cannot sell the reimbursement to us he is part of the problem. AIG has a 50 to 200 Trillion dollar derivative problem. Paulson left his GS chairman job in 2006- 2008 paying him millions of dollars to become treasury secretary paying him $150000. WHY? The financial few knew that the entire system was crashing in 2007 they needed someone to rescue GS and other financial instructions thru taxpayer dollars. Just look at Bernacki and Paulson rescue plans in 2008 the Fed spent Trillions and it went virtually unnoticed and the FED refused to tell “we the people” where the money went. The Treasury spent Billions and this is where we focused our attention. The Trillions given to AIG and other financial institutions went to GS and other foreign entities to build their personal profit while the taxpayers 401 became 101. We the people have no representation in congress or the presidency in these financial matters. We can vote them all out, republicans and democrats and start new. Have term limits and replace them after two terms. They call this a populist movement perhaps we need one. I wonder if we formed a “WE THE PEOPLE” POPULIST MOVEMENT WITH NO REPUBLICAN, DEMOCRATS, LIBERAL OR CONSERVATIVE LABELS to present our viewpoint how many would sign up?

    March 18, 2009 at 10:49 am |
  19. Paul

    "We the people" Perhaps it will take an AIG "Bonus" situation to stir "We the People" into action. Tim Geithner cannot sell the reimbursement to us he is part of the problem. AIG has a 50 to 200 Trillion dollar derivative problem. Paulson left his GS chairman job in 2006- 2008 paying him millions of dollars to become treasury secretary paying him $150000. WHY? The financial few knew that the entire system was crashing in 2007 they needed someone to rescue GS and other financial instructions thru taxpayer dollars. Just look at Bernacki and Paulson rescue plans in 2008 the Fed spent Trillions and it went virtually unnoticed and the FED refused to tell “we the people” where the money went. The Treasury spent Billions and this is where we focused our attention. The Trillions given to AIG and other financial institutions went to GS and other foreign entities to build their personal profit while the taxpayers 401 became 101. We the people have no representation in congress or the presidency in these financial matters. We can vote them all out, republicans and democrats and start new. Have term limits and replace them after two terms. They call this a populist movement perhaps we need one. I wonder if we formed a “WE THE PEOPLE” POPULIST MOVEMENT WITH NO REPUBLICAN, DEMOCRATS, LIBERAL OR CONSERVATIVE LABELS to present our viewpoint how many would sign up?

    March 18, 2009 at 10:48 am |
  20. Terry, TX

    I am not angry at AIG….
    Republican Snowe had the legislation in to prevent it in the Pork Job Stimulus Bill….Democrat Dodds removed it and put in legislation to allow them to receive the bonuses…Remember that’s when the bill swelled from 800 pages to 1200 pages…and no one was allowed to read it….because it was a crisis, no time to read it, Obama’s desk by Friday….Pelosi in Italy Monday and Obama on vacation until Tuesday. Anyone who voted NO was called an oppositionist…I wouldn’t of signed it if I couldn’t read it.
    So whose fault is it?

    Now we are outraged…by the same people in the Democratic Run Congress who allowed it… What’s their response…we will sue….how… you wrote the legislation in…case lost. We will tax it all…. unconstitutional…. the government cannot tax any entity 100% or unreasonably in this country. Case lost.

    I know what you can do ..President Obama can show up on Jay Leno….that’s the Presidential thing to do.

    March 18, 2009 at 10:37 am |
  21. cedar

    I agree yet at the same time..... If I were given the bonus, I'd keep it. I'm not a welthy person and at this point in the economy I would keep anything that was just handed to me. I would "pay it forward" by helping others out but as one of the "middle class" moms out there in fear of being without anything at the blink of an eye.... I'd take the money and run. No body is going to give it back. It is going to have to be taken. I feel scamed..

    do you thing AIG, as an insurance company, would allow me to "mis-rep" myself to gain insurance claims then let me keep the money cause i signed on the dotted line?? no. but they took money that should have gone some where else and I'm mad.

    March 18, 2009 at 10:27 am |
  22. Valerie Sims

    Anderson
    I say this company needs to be flushed out. Get new executives and start over........

    March 18, 2009 at 10:23 am |
  23. Arvind Patel

    AIG bonuses -I agree that people who worked for AIG deserve bonuses provided they made profit for company and worked in good faith but they all bankruptrd the compony. If we tax payer would not have bailed outt than company might have gone bankrut and worker even would not have received their pay chek forget about bonoses. They all should volunterrily should giveup their bonuses and shold not get any until they make company profitable.

    March 18, 2009 at 10:20 am |
  24. Michael "C" Lorton, Virginia

    AIG is worried about getting sued for double damages in Connecticut? What about getting sued for "raping" the taxpayers?

    March 18, 2009 at 10:19 am |
  25. Joy

    AIG is not the only guilty party. Those individuals who are receieving these funds should not accept these bonuses, regardless of a contract. Seriously, they should voluntarily give the money back. They didn't deserve it; look what their actions did to the company. Since when do bonuses go out to those who's actions put the companny in financial ruin?

    March 18, 2009 at 10:01 am |
  26. Peter Cymbalski

    The AGI executives who took the money should be ashamed to show their faces in public, but you have to be human to be ashamed. Senior management should be replaced. How do you sit around a Board room, receive billions in bail outs, then decide it's a good idea to "share the wealth". Irresponsible is not really the right word here, perhaps they felt a sense of entitlement, common sense be damned. We gave them the money and they were all too happy to take it, now we should be able to dictate that by continuing to make bad business decisions, we require that others take the reigns of this corporation gone wild.

    I partly hold the goverment at fault as well. How do we hand over billions in relief money, and not have some sort of language in the agreement that no bonuses would be distributed, regardless of where the money came from. There is a term called due diligence, which apparently was not used in this case. I'm not the one who decided to hand over the charity payments and I'm no business leader, but I knew they were supposed to get bonuses, how did the goverment not know that?

    March 18, 2009 at 9:43 am |