New York attorney general Andrew M. Cuomo has demanded that AIG recover the money it spent on lavish outings, bonuses and golden parachutes — and threatened sanctions if the insurer didn’t heed the order.
“In the last several months, as AIG was teetering toward bankruptcy, and operating with unreasonably small capital, AIG nevertheless made numerous extraordinary expenditures in the form of executive payments, junkets and perks for its executives,” Mr. Cuomo wrote in a
letter to the company’s board of directors, dated yesterday.
“We demand that the board of directors cease and desist any such further expenditures, and review, rescind, and recover all past unreasonable expenditures,” the letter read.
American International Group Inc. of New York, which is currently afloat due to an $85 billion federal loan, has come under harsh criticism in recent weeks.
While the carrier was receiving the loan, it paid $440,000 to send top life insurance producers on a trip to the St. Regis Resort in Monarch Beach, Calif.
Just days after the New York Federal Reserve Bank permitted AIG to tap its insurance subsidiaries for another $37.8 billion, news surfaced of an $86,000 company-paid hunting trip in England for a group of executives.
Now the party is over.
Mr. Cuomo also took issue with the $5 million cash bonus and $15 million golden parachute awarded to ex-chief executive Martin Sullivan.
The freewheeling spending on perks violated a state debtor and creditor law that would deem the payments to be fraudulent, Mr. Cuomo wrote.
The attorney general also said the carrier must also put in place policies and protections to ensure directors’ review of all company expenditures going forward, and rescind and recover improper expenditures where appropriate.
AIG will also have to provide Mr. Cuomo’s office with an accounting of all executive pay, including bonuses, stock options, severance pay and other perks — or else face legal action, the attorney general wrote.
“We are in receipt of attorney general Cuomo’s letter and will fully cooperate with his office,” said Peter Tulupman, an AIG spokesman.
“On Oct. 10, AIG issued a clear directive ending all activities that aren’t essential to the conduct of our business. We will continue to take all measures necessary to ensure that these activities cease immediately, he said.
“AIG’s priority is to continue focusing on actions necessary to repay the Federal Reserve loan and emerge as a vital ongoing business.”
