Cummings says AIG chief should resign

Md. congressman angered by reports of resort hotel event

November 12, 2008|By Paul West | Paul West,paul.west@baltsun.com

WASHINGTON -

Rep. Elijah E. Cummings called yesterday for the resignation of American International Group's top executive after news reports of another resort hotel event involving employees from the giant insurance firm.

Cummings has emerged as a prominent critic of AIG, which received a revised, $152 billion federal bailout package this week. The Maryland congressman was responding to a report by an Arizona television station that AIG executives participated in a recent training session for financial planners at a Phoenix resort.

AIG called the news accounts "misleading" and defended the conference as a legitimate business event for 150 independent financial planners. It said AIG's expenses were "minimal" and that unnamed sponsors and the financial planners themselves paid 90 percent of the cost.

The $343,000 conference included a number of senior AIG executives, according to KNXV-TV in Phoenix. Organizers of the three-day event made sure there were no AIG signs on the premises of the Pointe Hilton Squaw Peak Resort, in an apparent attempt to disguise the company's involvement, the station said.

In a letter yesterday to Edward M. Liddy, AIG's top executive, Cummings said that since taxpayers have kept the company alive, they have a right to judge AIG on its willingness to make "effective and efficient use of their money." Citing news accounts, the congressman said that "many senior AIG executives ... were observed to be working out at a spa, eating high-priced dinners, and holding cocktail parties. That a firm already reliant on taxpayers' funding would organize such an event is outrageous."

One step AIG can take toward meeting public expectations that government funds would be used wisely, the Baltimore Democrat wrote, is "by accepting your resignation from the positions of Chairman and Chief Executive Officer."

The company's chairman, in a statement, said news coverage "grossly mischaracterized" last week's AIG event. Liddy, a former chairman of Allstate Corp., became AIG's top executive less than two months ago as part of the federal bailout, which gave taxpayers an equity stake in the firm.

AIG called the meeting consistent with its recent review of scheduled meetings and conferences, more than 160 of which were canceled, Liddy said, to reduce expenses. The Arizona event was approved "because it provides the kind of communication we must conduct with the people who sell our products if we are to be successful and repay the U.S. taxpayer," said Liddy, adding that the financial planners were not AIG employees.

Cummings, however, has rejected AIG's contention that the conference was a legitimate business expense and described it as a party. He told Liddy that "you have decided to continue to hold corporate parties as if nothing has fundamentally changed with your business."

Cummings termed the event "(e)ven more shocking" in light of AIG's request for more taxpayer aid at about the time the event was taking place.

A company spokesman had no comment on the Cummings' letter.

During a hearing last month of the House Oversight and Government Reform Committee, at which details of a $440,000 AIG junket at a posh California resort surfaced, Cummings lit into company executives.

Two days later, the company announced "immediate cancellation of all outside meetings, conferences and recognition events across AIG, except those that are required by law or that are deemed absolutely critical to sustain our ongoing business needs," Liddy said in a statement.

This week, the government expanded and restructured the AIG aid package, giving the firm more time to repay taxpayers and lowering the interest rate on the loan. AIG, once the world's largest insurance company, came close to collapse in September as a result of bad investments tied to subprime mortgages.

In its report on last week's conference, the Phoenix station said AIG executives were drinking coffee at poolside meetings and working out at the hotel's spa while other attendees were attending seminars in hotel conference rooms. The station also reported that six executives dined at a nearby McCormick & Schmick's restaurant and paid more than $400 for drinks, appetizers, and meals.

According to the station, retired Pittsburgh Steeler quarterback Terry Bradshaw was originally scheduled to appear as a motivational guest speaker. Bradshaw's appearance was canceled shortly before the conference began, the station reported, quoting an AIG spokesperson.

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