Top executives at failed insurance giant American International Group spent $440,000 at a company retreat just days after the federal government bailed out the company with $85 billion in taxpayer funds, according to documents revealed Tuesday at a Capitol Hill hearing.
American International Group (AIG) paid the exclusive St. Regis Resort Monarch Beach Resort in Dana Point, Calif., almost $200,000 for rooms - some costing as much at $1,000 a night - $150,000 for meals and $25,000 in spa and salon charges for pedicures, manicures, facials and massages.
"Less than one week after taxpayers rescued AIG, company executives could be found wining and dining at one of the most exclusive resorts in the nation," said Henry A. Waxman, chairman of the House Committee on Oversight and Government Reform.
The California Democrat also produced documents that showed top AIG officials hid significant oversight problems from shareholders months before the bailout.
"You have cost my constituents and the taxpayers of this country $85 billion and run into the ground one of the most respected insurance companies in the history of our country," said Rep. Carolyn B. Maloney, New York Democrat.
• View AIG company executives' resort bill:Download pdf
Mrs. Maloney then added that former company chief executives Martin J. Sullivan and Robert B. Willumstad, who testified at the hearing, "should apologize to the American people for your mismanagement."
Mr. Sullivan and Mr. Willumstad, who left the company before the retreat, said they would not have condoned such an expensive meeting on their watch only days after the company escaped bankruptcy.
"If I had seen bills like that, I would have asked questions," said Mr. Sullivan, who in June was ousted from the company - three months before its financial collapse.
Mr. Willumstad, who took over for Mr. Sullivan but stepped down last month as part of the government bailout deal, said he was not aware of the retreat, even though it was held only a few days after he left the company.
The two former executives were questioned for more than two hours by Democratic and Republican members of the committee in the second of several hearings to explore the origins of the Wall Street crisis. No current AIG officials testified.
On Monday, the committee heard testimony that Lehman Brothers doled out more than $20 million in bonuses to top executives just four days before the investment giant declared bankruptcy and accelerated last month.
AIG avoided collapse in September with a $85 billion Treasury loan. The deal gave the government an 80 percent stake in AIG, the right to remove senior management and to veto payment of dividends to shareholders as ways to protect taxpayers.
The action was followed by the most significant Wall Street downturn since the Sept. 11, 2001, terrorists attacks, prompting the Congress last week to approve a Bush administration plan to spend $700 billion to help rescue failing financial institutions.
Mr. Waxman showed a letter sent to AIG from the Office of Thrift Supervision in March expressing concerns that corporate oversight in the company's financial products division "lacks critical elements of independence, transparency and granularity."
Internal documents also showed that AIG's auditor, PricewaterhouseCooper, reported similar problems, Mr. Waxman said.
"AIG executives should have been smarter, but they weren't," said Rep. Thomas M. Davis III of Virginia, the ranking Republican on the committee. "They should have seen the warning signs, but they didn't. They should have questioned the exotic products and the agencies that rated them as AAA, but they didn't."
Mr. Sullivan, who was at AIG for more than 30 years, said it was "unintended consequences" - not corporate maleficence - that led to a "dominolike series of repercussions" to its eventual collapse.
Mr. Willumstad added that financial rating agencies initially had agreed to wait to review AIG's ratings until he was scheduled to release a strategic plan of the company Sept. 25. But when Lehman Brothers and other financial giants began to falter in early September, the rating agencies said they no longer would wait and then downgraded AIG's holdings, leading to company's financial downward spiral.