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NU Online News Service, March 16, 3:51 p.m. EST
American International Group said employees have paid back close to $45 million in bonus payments that the taxpayer-supported company has asked to be returned.
Mark Herr, a spokesman for the New York-based insurance company, said in an e-mail message that as of the beginning of this month, the company has received $40 million of the $45 million that employees said they would pay back to the company.
The bonuses were paid to employees of AIG’s Financial Product’s unit as retention bonuses, to keep them to wind down the unit under contracts agreed to back in 2008. The unit’s losing enterprises nearly bankrupted the company and the bonuses attracted a firestorm of criticism from congress members and other officials.
Under terms of their contracts, employees were to receive $165 million in 2009 and $236 million in 2010, he said.
However, as a recipient of federal loans and other monies from the New York Federal Reserve Bank and under the Trouble Asset Relief Fund, the company came under federal supervision, making public its compensation arrangements.
When the $165 million was paid, it drew special criticism because the Financial Products Unit, buying heavily into Credit Default Swaps, took AIG close to financial ruin.
In the wake of the bonuses, Mr. Herr explained in an interview with National Underwriter, former Chief Executive Edward Liddy told Congress last year that employees who received more than $100,000 were asked to give back 50 percent of the award, which amounted to $19 million as of September 2009.
Between the last payment period and the next round of bonuses that were paid yesterday, a combination of forfeiture and employee’s leaving the company and the sale of businesses, reduced the scheduled payment of bonuses from $236 million to $195 million.
Mr. Herr said that for tax purposes some employees wanted to receive their bonuses early. The company offered to make the early payment in return for a cut in the bonus (10 percent for current employees and 20 percent for former employees).
Ninety-eight percent of current employees took up the offer. Mr. Herr said “fewer” of the former employees took the company up on the offer. A total of $105 million in bonus money was paid in February, he said.
Yesterday, AIG paid out the remainder of the reward, holding back $21 million in bonuses and paying $46 million in bonuses to the remaining employees.
Of the remaining $5 million, Mr. Herr said, “We are confident we will reach $45 million and that chapter will be closed.”
When asked about reports that some of those who received bonuses were unhappy that they did not receive the full amount they expected and might sue, Mr. Herr noted that attorneys representing employees had been quoted in the media concerning litigation, but he said he has heard nothing official.