AIG London staff dig in heels over bonus payments despite US threats

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March 26, 2009 - Christine Seib in New York - Times of London http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article5977381.ece

Most of the London-based recipients of AIG’s $165 million bonus payout have decided not to return their windfalls despite pleas and threats from US authorities.

Gerald Pasciucco, head of AIG Financial Products (AIGFP), told a staff meeting for UK and Paris employees on Monday that it was up to them whether they returned their bonuses as requested by Edward Liddy, AIG’s government-appointed chairman and chief executive.

But one staff member told Reuters: “The vast majority of people in London have made the decision that the request is pretty offensive . . . It effectively constitutes blackmail whether it is criminal or not. There is no moral reason to give it back.”

A compliance officer at Banque AIG, an associated company, suggested in e-mails to staff that the repayment demands, which were also made by Andrew Cuomo, the New York attorney-general, and various lawmakers, were illegal under UK law.

AIG needed $173 billion in US taxpayers’ cash to stay afloat but still insisted on paying $165 million in bonuses this month to 418 workers at AIGFP, which caused the company’s most catastrophic losses. About $85 million of the bonus pool was paid to workers outside the US.

American voters and lawmakers are furious at the payments. Even Mr Liddy described some of the windfalls as “distasteful”.

Mr Cuomo, who is investigating whether the payments broke any New York laws, said on Monday that nine of the ten recipients of the largest bonuses, and 15 of the top 20, had agreed to return their bonuses.

His aides confirmed that many of those who declined to hand back their bonuses were based in London. AIGFP’s Mayfair office conducted some of the most toxic business undertaken by the disgraced insurer.

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