- The Washington Times - Tuesday, March 17, 2009

HARTFORD, CONN. (AP) - Connecticut lawmakers said Tuesday they hope to change a state law that’s being partially blamed by insurance giant American International Group as a reason for paying $165 million in retention bonuses to executives.

AIG, which has received tens of billions of dollars in federal bailout money, has said it is bound by Connecticut’s Wage Act to pay the bonuses because its financial products division is headquartered in Wilton, Conn.

The state law allows employees to sue for twice the full amount of contractually owed wages _ in this case $330 million _ as well as attorney’s fees, if the employer refuses to pay up. House Minority Leader Lawrence Cafero, an attorney, said he believes Connecticut’s definition of wages is written broadly enough to include the retention bonuses and other bonus pay.

“They have consistently cited the Connecticut Wage Act as the primary reason that they must give out those bonuses. We hope to put an end to that,” said Cafero, adding that Connecticut “should not be used as the scapegoat or the excuse for AIG” to pay the controversial bonuses.

The White House and Congress are looking for ways to block the bonuses or recoup that money. Congressional Republicans said President Barack Obama and his administration should have leaned harder on AIG executives to reject the bonuses.

Connecticut Gov. M. Jodi Rell, a Republican, called it “contemptible” for AIG to cite her state’s wage act.

“I strongly support legislation that would prohibit entities which receive federal or state bailout money from using those funds for excessive bonuses or payouts similar to AIG’s outrageous attempt at self-enrichment,” she said.

An AIG spokesman did not immediately return a call seeking comment.

Cafero said that while it could be too late to affect this latest round of payments, he hopes the state’s General Assembly can revamp the law, possibly as early as March 25, to exempt future bonuses that AIG is expected to pay executives.

A draft of the bill specifically targets employers receiving funds from the federal Troubled Asset Relief Program or any other government stimulus program “designed to purchase assets or equity from financial institutions.”

Cafero said Republican leaders planned to work on a final version over the coming days with Democrats, who control the General Assembly.

Connecticut Attorney General Richard Blumenthal said he has “significant doubts” about the validity of AIG’s claim that it is required to pay the bonuses because of the state’s wage law.

“AIG is shamelessly shielding itself behind the Connecticut Wage Act _ a joke of a justification for squandering scarce taxpayer resources,” he said.

Blumenthal said his office is investigating the merits of AIG’s claim and will “take every step necessary to fight this gross misuse of taxpayer money.”

Even though AIG’s bonus plans were disclosed last year, outrage and threats poured forth from Capitol Hill on Tuesday.

U.S. Rep. John Larson, D-Conn., said he has met with Democratic leaders on the issue and that legislation will be offered this week to recover taxpayer funds. He said further action will be taken to impose more restrictions on the bailout money.

“This must stop now,” he said. “AIG has abused the trust of America’s taxpayers far too many times,” he said.

AIG reported this month that it lost $61.7 billion in the fourth quarter of last year, the largest corporate loss in history, and it has benefited from more than $170 billion in a federal rescue.

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