American International Group Inc. has given employees of its Financial Products unit until Tuesday to accept a cut in money owed them under a retention plan in return for an earlier payout, according to proposals obtained by Reuters Monday.
The deadline in AIG’s proposals, dated Jan. 21, comes a day before U.S. Treasury Secretary Timothy Geithner and others testify before a congressional panel looking into the collapse and government bailout of AIG.
Once the world’s largest insurer, AIG nearly collapsed from credit default swaps, derivatives the Financial Products business had sold.
AIG is asking current Financial Products employees to take at least a 10 percent cut on the cash portion of the payment due them, according to the proposal, signed by AIG Financial Products Chief Operating Officer Gerry Pasciucco.
A separate proposal asks former Financial Products employees to accept a discount of at least 20 percent.
Both sets of employees would get the payments by Feb. 5 if they accept the cuts. AIG has until March 15 to make the payments, according to the proposals.
Members of Congress have pressured Treasury officials about retention payments to the unit’s current and former employees.
AIG’s payment to employees last March triggered sharp public criticism and several demonstrations, including a bus tour of employee homes near the unit’s Wilton, Connecticut headquarters.
Employees of AIG Financial Products had agreed to pay back $45 million from $165 million in retention payments they received in March 2009, but have returned only $19 million, putting AIG under pressure to recover the remaining money.
The latest proposals are AIG’s bid to raise the remaining $26 million from retention payments of $195 million that current and former employees of the unit are due in March.
“I have clients who were willing to participate, but it’s hard to evaluate the proposal without knowing who has reviewed and approved it,” said Andrew Goodstadt, a partner at Thompson Wigdor & Gilly LLP, which is representing 13 current and former AIG Financial Products employees.
Kenneth Feinberg, the U.S. Treasury Department’s special master for compensation hired to help sort out pay at firms that received government bailouts, has also put pressure on AIG to get back the remaining money.
AIG has been trying to come up with a response to what Feinberg wants and the proposals are a way to sound out employees, a source familiar with the situation said, declining to be identified because of the sensitivity of the issue.
“We remain committed to meeting our commitments to return a portion of the FP retention payments. We continue to work with the special master on the appropriate way to do so,” AIG said in a statement.
Public anger over outsized Wall Street bonuses is building to a new crescendo. A group of Congress members sent a letter Friday to Geithner and Feinberg demanding that the unit’s employees be held accountable for the remaining money.
“This lack of integrity and respect for the taxpayer is a slap in the face and indicates that they think they will not be held accountable by the federal government,” the lawmakers wrote in the letter, which was obtained by Reuters. “We demand that you prove this wrong.”
Democratic Rep. Edolphus Towns, chair of the House Oversight and Government Reform Committee, has scheduled a Jan. 27 hearing on the AIG bailout.
Along with Geithner, Neil Barofsky, special inspector general for the Troubled Asset Relief Program; Elias Habayeb, former chief financial officer of AIG Financial Services Group; and Thomas Baxter, general counsel for the New York Fed, are expected to testify.
AIG was left on the hook for tens of billions of dollars in collateral payouts to some of the biggest U.S. and European financial institutions, forcing the U.S. government to step in with a $182.3 billion aid package.
AIG Financial Products has been unwinding its positions. It has cut staff to 237 from 428 before the bailout, and has cut outstanding trades to a notional value of $940 billion from $1.9 trillion in September 2008 and contracts to 16,100 from 44,000.
(Reporting by Paritosh Bansal and Steve Eder; Editing by David Gregorio)
Was this article valuable?
Here are more articles you may enjoy.