Tuesday, March 17, 2009

ALBANY, N.Y. (AP) — New York Attorney General Andrew Cuomo said Tuesday that troubled insurance giant American International Group paid bonuses of $1 million or more to 73 employees, including 11 who no longer work for the company.

Mr. Cuomo subpoenaed information from AIG on Monday to determine whether the payments made over the past weekend constitute fraud under state law. He says contracts written in March 2008 guaranteed employees 100 percent of their 2007 pay for 2008, regardless of their performance.

President Obama and Washington lawmakers have blasted AIG for paying more than $160 million in bonuses to employees of its Financial Products division, the unit primarily responsible for the meltdown that led to a federal bailout of the company. Mr. Cuomo said AIG mailed the bonus checks Friday.

The company and some federal regulators have said it was obligated by contract to make the payments, prompting Mr. Cuomo to request copies of the contracts. He said the bonuses might have been fraudulent if AIG officials knew the company couldn’t afford them.

See related story: Grassley: AIG execs should repent, not kill selves

“You could argue if the taxpayers didn’t bail out AIG, those contracts wouldn’t be worth the paper it’s printed on,” he said Monday.

AIG spokeswoman Christina Pretto said Monday the company was in ongoing contact with Mr. Cuomo’s office and would respond to his requests for information and the subpoena. There was no immediate AIG comment following Mr. Cuomo’s disclosure Tuesday of the bonus amounts. Mr. Cuomo did not release the names of the recipients.

In a letter Tuesday to Rep. Barney Frank, Massachusetts Democrat and chairman of the House Committee on Financial Services, Mr. Cuomo outlined the bonus and contract information and asked the panel to take up the issue at a hearing scheduled for Wednesday.

“These payments were all made to individuals in the subsidiary whose performance led to crushing losses and the near failure of AIG,” Mr. Cuomo wrote. “Thus, last week, AIG made more than 73 millionaires in the unit which lost so much money that it brought the firm to its knees, forcing a taxpayer bailout. Something is deeply wrong with this outcome.”

According to the attorney general’s office, the top individual bonus was more than $6.4 million, and the top seven received more than $4 million each.

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