AIG’s Top Swaps Managers Kept Bonuses, Feinberg Says

American International Group Inc.’s highest-paid executives in the unit blamed for pushing the insurer to the brink of collapse haven’t returned bonuses as they’d promised, according to the Obama administration.


Four of five managers in AIG’s Financial Products unit under the jurisdiction of pay master Kenneth Feinberg didn’t make good on pledges to return the retention bonuses as of August, Feinberg said in documents released yesterday. The fifth employee hadn’t made any promise, Feinberg said. The pay master rejected AIG’s proposal to pay the five executives a total of $13.2 million this year.

“The performance of AIG Financial Products has contributed significantly to the deterioration in AIG’s financial health,” Feinberg said. Compensation proposed by New York-based AIG for the staff doesn’t “adequately reflect the role of AIG Financial Products” in the decline of the insurer, he said.

AIG, which received a $182.3 billion U.S. government bailout, ignited a backlash after giving about $165 million in March to its derivatives staff. The insurer said the pay was needed to keep staff to unwind money-losing trades. President Barack Obama called the bonuses an “outrage,” and then-Chief Executive Officer Edward Liddy asked employees getting more than $100,000 to return half.

Financial Products employees have returned $19 million of the $45 million they committed to surrender from the March awards, Neil Barofsky, the chief watchdog of the U.S. financial rescue program, said in a report last week. AIG officials told Barofsky that employees were waiting to secure agreements on a pending retention award before returning the March bonuses.

Deadline Approaching 

“Employees have until the end of the year to fulfill their commitments to return a portion of their March 2009 payment,” Christina Pretto, an AIG spokeswoman, said in a telephone interview. The insurer expects the workers to honor their commitments, she said.

Feinberg, who has jurisdiction over the 25 highest-paid employees at AIG and other firms that got U.S. bailout funds, ruled that cash salaries at the insurer couldn’t exceed $500,000 a year unless “good cause” was shown. Compensation would also include stock units tied to four major AIG divisions that are paid out in three annual installments.


He said the changes resulted in a 91 percent decrease in cash pay from 2008. Thirteen employees that would have been under Feinberg’s jurisdiction have left AIG, he said.

‘Ongoing Discussions’ 

In an August report to the pay master, AIG suggested increasing the Financial Products executives’ base salaries to as much as $950,000 and awarding bonuses of as much as $2.6 million.
The executives should return the bonuses and will receive only their cash base salaries this year, Feinberg said. He is in “ongoing discussions” with AIG regarding these workers, he said.
The highest-paid workers who have left can receive their cash salaries through the date of their employment and up to $25,000 in other compensation, he said.

Feinberg approved a $10.5 million annual pay package for AIG CEO Robert Benmosche, according to a Treasury Department letter earlier this month. Benmosche will get a $7 million annual salary and as much as $3.5 million in long-term incentives.

- Via Bloomberg