Geithner vows to recoup bonuses

Tells Congress AIG must repay Treasury

March 18, 2009|Laurie Kellman, Associated Press

WASHINGTON - As anger intensified over the $165 million in post-bailout bonuses paid to AIG executives, Treasury Secretary Timothy Geithner said yesterday that any bonus payments that the Treasury cannot recoup will be recovered by requiring AIG to repay the Treasury an amount equal to the remaining bonuses.

The Treasury also would deduct an amount equal to the payments from AIG's latest $30 billion credit line from the government, Geithner wrote in a letter to congressional leaders.

American International Group paid bonuses last week of $1 million or more each to 73 employees, including 11 who no longer work for the company, New York Attorney General Andrew M. Cuomo said yesterday.

On Capitol Hill, livid Democrats issued the insurance giant an ultimatum: Give back the bonuses, or watch Congress tax it away with emergency legislation.

Outrage has been building across the country and official Washington over the bonuses, which went Friday to employees of AIG's Financial Products division, the unit primarily re sponsible for the meltdown that forced it to take more than $170 billion in taxpayer bailout funds.

Edward Liddy, the CEO of AIG, is scheduled to testify today before the House Committee on Financial Services. In advance of the hearing, Cuomo provided more ammunition in a letter yesterday to Representative Barney Frank, a Massachusetts Democrat who is the panel's chairman, that outlined information on the bonuses he received after issuing a subpoena on Monday.

Outrage understandable but misdirected, a bailout administrator says. B7.

Cuomo, who is trying to determine whether the payments constitute fraud under state law because company officials knew that it could not afford them, said the top individual bonus at AIG was more than $6.4 million, the top seven received more than $4 million each, and the top 10 received $42 million combined.

"Again, these payments were all made to individuals in the subsidiary whose performance led to crushing losses and the near failure of AIG," Cuomo wrote. "Thus, last week, AIG made more than 73 millionaires in the unit which lost so much money that it brought the firm to its knees, forcing a taxpayer bailout. Something is deeply wrong with this outcome."

And the contracts written last March guaranteed employees 100 percent of their 2007 bonus amounts for 2008, "despite obvious signs that 2008 performance would be disastrous in comparison to the year before," Cuomo wrote.

"AIG also claims that retention of individuals at Financial Products was vital to unwinding the subsidiary's business," the attorney general wrote to Frank. But AIG has been unwilling to provide their names, despite his subpoena for the list, making it impossible to test that claim, Cuomo said.