The News: New Fight Over AIG Retention Pay
A three-way legal battle is brewing between the government, American International Group and dozens of employees of its financial products subsidiary, as a year-end deadline nears for executives of AIG Financial Products to hand back millions in retention pay they received last year.
"As the final days of 2009 tick away, a majority of that money remains unpaid," the Washington Post reports Wednesday.
Those AIG retention payments sparked one of the bitterest chapters of the financial crisis early this year. At least 18 AIG Financial Products executives agreed to return $45 million in contractually agreed payments after New York State Attorney General Andrew Cuomo won a suit to gain access to individual employees' names and payment amounts and threatened to publish them.
Only about $19 million out of the promised $45 million has been given back, the Post says.
The controversy now threatens to throw fresh tinder on the smoldering public anger at financial professionals. Ramifications of a renewed flare-up over AIG pay could extend to the entire financial sector - as happened last March, when the U.S. House of Representatives passed a tax measure that would have confiscated 90 percent of any bonus paid to any employee of a company receiving federal bailout funds if the total compensation of the employee plus his or her spouse exceeded $250,000. (That legislation died in the Senate.)
AIG employees are holding off until they learn whether Treasury Department compensation czar Kenneth Feinberg will block the next $198 million of retention payments, which employees are due to receive in March. Feinberg reportedly is demanding that the 2010 retention pay amounts be reduced, and that employees fulfill their promises to repay last year's amounts before he approves any 2010 compensation.
Although Feinberg, AIG management and employees continue to negotiate over the status of past and future bonuses, those talks are stymied by a mutual lack of trust. "In order to negotiate, there has to be good faith and trust, and the government has shown those two things don't exist with them," an unnamed AIG Financial Products executive told the Post.
The employees are bracing for a court fight. Dozens have hired lawyers, and preparing lawsuits if AIG or government officials try to block the next round of payments. "They're willing to assert their contractual rights in a court of law. They have extremely strong claims," Andrew Goodstadt, an attorney for more than a dozen AIG Financial Products employees, told the paper.
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