Lawsuit Against AIG Seeks Return of Bonuses, Perks

By | March 30, 2009

A lawsuit filed on behalf of shareholders of American International Group Inc. is demanding company executives return millions of dollars in bonuses, dividends and other perks.

The lawsuit, which seeks class-action status, also seeks unspecified damages as well as the removal of AIG’s top brass. It claims shareholders have lost $200 billion because of AIG’s gross mismanagement and corporate waste over the past 81/2 years.

Freedom Watch, a nonprofit organization that advocates for ethics in government, filed the lawsuit last Thursday in U.S. District Court in Los Angeles.

Among the defendants named in the suit are former Chief Executive Officers Maurice Greenberg, Martin Sullivan and Robert Willumstad, as well as current CEO Edward Liddy. The suit also targets 10 AIG board members, including Liddy.

AIG spokesman Joe Norton said Friday the company had no immediate comment.

The defendants “have seriously undermined and damaged AIG’s financial health and valuable past reputation by systematically causing and/or permitting the company to engage in a litany of highly risky, detrimental and reckless business dealings,” the lawsuit states.

The company also gave misleading and false assessments when it reported earnings in 2006 and 2007, according to the lawsuit.

Continuing to pay a dividend and even raising it at one point in mid-2007 shows the defendants were either trying to misrepresent the financial stability of the company or derelict in their management and oversight, the lawsuit states.

The filing follows the recent revelation that AIG employees got $165 million in bonuses after AIG received $182.5 billion in government aid.

The bonuses were given to employees of the financial products division, a global unit that issued derivatives called credit default swaps, which drove AIG almost to collapse last year.

The government intervened to provide support for AIG because of fears that a collapse of New York-based company would trigger hundreds of billions of dollars in losses at financial institutions worldwide, further crippling the already battered credit markets.

Larry Klayman, chairman and general counsel of Freedom Watch, said the problems at AIG have “gotten under the skin of the American people.”

“A lot of information has come to light,” Klayman said. “It’s an issue the American people want dealt with right now.”

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