New York — New York Attorney General Andrew Cuomo is investigating what he contends is "unwarranted and outrageous" spending by American International Group Inc. (AIG), even as the struggling insurer receives $123 billion of U.S. government funding to stay alive.

In a letter to AIG's board Wednesday, Cuomo demanded the company cease the kind of spending that sent executives on luxury retreats costing hundreds of thousands of dollars after a taxpayer bailout.

"The taxpayers of this country are now supporting AIG through rescue financing, which makes such expenditures even more irresponsible and damaging," Cuomo wrote.

The company, once the world's largest insurer, earlier this year had provided a former chief executive a $5 million bonus plus a $15 million golden parachute. It also let a terminated executive responsible for much of AIG's losses keep $34 million of bonuses, Cuomo said.

"We believe these expenditures and payments, made in the absence of fair consideration, violated New York law," Cuomo wrote.

The attorney general demanded AIG provide a full accounting of such expenditures—"bonuses, stock options, severance payments, gratuities, benefits, junkets, and any and all other perks"—since January 2007. Cuomo then wants AIG to recover or rescind these payments.

Cuomo threatened to pursue legal action if the board does not immediately comply.
AIG replied in a statement it would cooperate with Cuomo and added that it had issued orders last week to end all activities that weren't essential to the conduct of its business.

AIG drew fire last week on news that it had spent $200,000 on hotel rooms and $23,000 on spa services at an event, just days after it got the emergency loan from the government to avoid bankruptcy in the middle of the worst credit crisis in decades.

The company has said it plans to sell most of its assets and focus in its core insurance operations to pay back the U.S. government loan.

Source: Reuters

Register or login for access to this item and much more

All Digital Insurance content is archived after seven days.

Community members receive:
  • All recent and archived articles
  • Conference offers and updates
  • A full menu of enewsletter options
  • Web seminars, white papers, ebooks

Don't have an account? Register for Free Unlimited Access