Another Round Of Aig Bonuses Set For Today

February 03, 2010|By The Washington Post

American International Group plans today to pay another round of employee bonuses worth about $100 million, said several people familiar with the matter, a year after similar payments at the bailed-out insurance giant infuriated many Americans and inflamed Washington.

This week's retention payments will go only to employees at the company's Financial Products division who agreed recently to accept 10 percent to 20 percent less money than AIG had initially promised them years ago. In return, they are receiving their payments more than a month ahead of schedule.

The company is still scheduled to pay out tens of millions of dollars more in March, mostly to former employees who did not agree to the concessions.

AIG executives have been scrambling to hammer out a compromise before March 15, when the firm faces a deadline to pay nearly $200 million in bonuses to employees at Financial Products, the unit whose risky derivatives deals brought the insurer to the brink of collapse in 2008. Government and AIG officials have been eager to avoid a repeat of the public furor that erupted last March when an earlier round of payments - worth $168 million - went to the same set of employees.

People familiar with the negotiations said about 97 percent of current employees in the Financial Products division agreed last week to forgo 10 percent of their upcoming bonus in return for early payment. Participation rates have remained far lower - about 35 percent, two people said - among former employees, who were asked to surrender 20 percent of their bonuses.

Gerry Pasciucco, who was hired after the bailout to run Financial Products and help dismantle it, sent an e-mail to employees this week explaining that the company had decided to move forward with the reduced payments.

Andrew Goodstadt, a New York lawyer who represents more than a dozen current and former Financial Products employees, said he hoped the deal would be a step toward normalcy. "My clients are looking forward to getting paid their contractual entitlements," he said, "and resolving this matter once and for all."

The new payments are in part an attempt by AIG to meet two demands from U.S. compensation czar Kenneth R. Feinberg. One is to scale back the size of the bonuses. By paying the employees less than they had been promised, the company is also seeking to compensate for $26 million that Financial Products employees had previously said they would return by the end of last year but did not.

Few aspects of the financial crisis have angered lawmakers and ordinary Americans as much as AIG bonuses. The controversy has its roots in early 2008, months before the government's rescue of the giant insurer. As the housing bubble was collapsing and the company's trading in financial derivatives called credit-default swaps was starting to cost the company billions of dollars, AIG officials instituted the guaranteed retention payments to keep employees in place during the coming period of financial instability. Financial Products employees were promised more than $400 million in retention pay, with lump sums due in March 2009 and March 2010.

Government and AIG officials agreed last year that the bonuses at Financial Products, however unsavory they might seem, were legally binding. That explanation did not sit well with millions of Americans who were out of work and whose taxpayer dollars had gone to propping up the faltering insurance giant.

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