American International Group Inc. was sued by former staff who say they were denied $100 million in bonuses amid public outrage over derivative trades that crippled the insurer and threatened the stability of global financial markets.
Details of the U.K. lawsuit, which was filed in 2014, emerged at a London court hearing Friday. The 23 traders, analysts and managers, who worked at a subsidiary of AIG Financial Products Corp., were denied deferred compensation because of “significant media and political pressure” resulting from the U.S. government’s rescue deal, according to documents their lawyers submitted for the preliminary hearing.
AIG’s Financial Products unit almost brought down the company with money-losing derivative bets backing subprime mortgages. The U.S. saved AIG in a 2008 rescue that then-Federal Reserve Chairman Ben S. Bernanke said made him ” more angry” than any other measure the government took to counter the financial crisis. The bailout swelled to $182.3 billion, and public ire intensified after the company committed to paying hundreds of millions of dollars in retention awards to keep AIGFP staff so they could help unwind trades.
“The claimants were part of an AIG business that lost billions of dollars in the financial crisis and yet they are now suing for deferred bonuses of more than $100 million,” AIG spokesman Jon Diat said in an e-mail. “We believe they have no rights under the deferred-compensation plan, which by its terms properly reduced their accounts as a result of their business’ massive losses.”
Only two employees are identified in the available court documents: Tobias Gruber, of Surrey, England, and Ilyas Kanaan, of Beirut, Lebanon.
“These proceedings relate to failures to honor the contractual obligations owed to the claimants in accordance with employee deferred-compensation schemes,” according to a statement from Stephenson Harwood LLP, which represents the pair. “As proceedings are ongoing, it would be inappropriate to comment further.”
‘Very Large’ Claim
The “claim is a very large one,” Judge William Blair said at the hearing. “I’m told it is in the region of $100 million.” He declined the employees’ request for an additional preliminary hearing on a specific point of evidence. A trial is scheduled for January 2018.
AIG argues that even if the employees had a valid claim, it would be subordinate to the other debts of the group, the judge said in his summary of the case.
It’s the latest large-scale legal dispute over bonuses to be heard in London courts, which have proved to be receptive to the claims of finance workers who say they were unfairly treated. In 2013, a group of 104 Dresdner Kleinwort bankers won a protracted legal battle against Commerzbank AG over about 50 million euros ($55 million) in bonuses that were promised but never paid following the financial crisis.
The case is Tobias Gruber v. AIG Management France SA, High Court of Justice, Queen’s Bench Division, Commercial Court, 14-1226.
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