AIG hasn’t returned bonuses as promised

American International Group Inc. employees have returned less than half of the $45 million in bonuses they promised to repay in a goodwill gesture after the company received tens of billions of dollars in taxpayer aid, according to the Treasury Department’s independent watchdog.

A public outcry erupted in March when news broke that AIG paid out at least $165 million in executive bonus pay after being awarded $180 billion in taxpayer loans and incentives.

Days later, to avoid further embarrassment to the company, former AIG Chief Executive Edward M. Liddy told a packed House committee hearing that he had asked employees to voluntarily give back half of their bonuses. Mr. Liddy, appointed to the executive post after news of the company’s problems broke, said he lacked the legal authority to rescind the bonus payouts altogether.

But an audit of the AIG bonus program released Tuesday by Neil Barofsky, special inspector general for the Troubled Asset Relief Program (TARP), found that, as of Aug. 31, AIG had received pledges from employees to return only $45 million in bonuses.

So far, however, only a little more than $19 million of bonus payments has been collected, the report said.

Mr. Barofsky, testifying before the House Oversight and Government Reform Committee on Wednesday, said that it appeared unlikely that the Treasury Department would be able to collect the full $45 million that was pledged.

“AIG has noted that it’ll be difficult for them to enforce collecting the money for those that have left the company,” Mr. Barofsky said.

Some employees pledging to return bonus money have since left the company, making collection extremely difficult, the audit said.

AIG officials told auditors that progress in recouping the full amount pledged has been delayed as the company negotiates with employees to restructure a second round of bonus payments totaling $198 million scheduled to be awarded by March 2010.

The audit accused the Treasury Department of failing to investigate AIG’s massive employee bonus program adequately before allowing the company to participate in the federal government’s $700 billion TARP bailout, created last fall as an emergency stopgap to stabilize the nation’s wobbly economy in the midst of the worst recession since the 1930s.

The audit caused a stir with the committee, with lawmakers from both parties accusing AIG of irresponsible use of taxpayer money while condemning federal regulators for failing to discover the bonuses before bailing out the company.

“Americans dont resent people who make a lot of money — we all want to make money,” said Rep. Edolphus Towns, New York Democrat, who is the oversight committee chairman. “But what infuriates people is when bosses at bailed out companies, virtual wards of the state, continue to rake in millions — in effect, our millions.

“It just doesnt seem right that the people who caused this tragedy should be so richly rewarded.” Rep. Darrell Issa, California Republican and the committee’s top GOP member, accused the government of becoming too involved in the private sector and said both political parties are to blame.

“Rather than learning from the mistakes of his predecessor, President Obama has entangled the federal bureaucracy across the private sector,” Mr. Issa said. “This was a political bankruptcy and not handled through a bankruptcy judge as our law requires.”

The Treasury Department did not become aware of the extent of the bonuses until February — after AIG received billions of dollars in taxpayer aid, the audit says.

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