Top executives at the failed insurance giant AIG spent more than $440,000 at a company retreat days after the federal government bailed out the company with $85 billion in taxpayer funds.
American International Group (AIG) paid the exclusive St. Regis resort in Monarch Beach, Calif., more than $200,000 for rooms — some costing as much at $1,000 a night — as well as more than $150,000 in meals, according to released documents an testimony during a hearing of the House Committee on Oversight and Government Reform Tuesday on Capitol Hill.
“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 committee Chairman Henry A. Waxman, California Democrat.
The invoice also included almost $25,000 in spa and salon charges for pedicures, manicures, facials, massages and other services.
“If a company is drowning and you’re going to spend that kind of money, that’s crazy,” said Rep. Elijah E. Cummings, Maryland Democrat, at the hearing’s morning session. “The American people are paying for that.”
No current AIG officials are scheduled to testify at the hearing, though two former company chief executives Martin J. Sullivan and Robert B. Willumstad, are scheduled to appear Tuesday afternoon.
Lynn E. Turner, a former chief account with the Securities and Exchange Commission, told the committee that, based on known evidence, executives at AIG or other failed Wall Street firms shouldn’t be criminally charged for their actions that lead to their company’s financial demise.
“I don’t think you send people to jail for making bad biz decisions,” said Mr. Turner, who was one of two witnesses who testified at the hearing’s morning session.
But he added that if evidence later reveals that company officials were aware of illegal activities and kept quiet, “Then yes, a little time behind bars might be warranted.”
Eric R. Dinallo, superintendent of the New York State Insurance Department, told the committee that the industry and regulators should have detected signs earlier that Wall Street practices were detrimental to the overall health of the industry.
“It is the case that a lot of us… got wrong what was going to be the default rates, which our global economy hinges on,” Mr. Dinallo said.
AIG only avoided collapse in September with a $85 billion Treasury loan, stock market losses began to plummet, prompting the Federal Reserve to inject $180 billion into the global market.
The company’s failure was followed by the most significant Wall Street downturn since the September 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.
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 hearing was the second in two days that the Oversight Committee held to explore the lead to the recent Wall Street crisis. 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.