March 21 (Bloomberg) -- American International Group Inc., whose compensation policies before and after its U.S. bailout are being investigated, turned over information on its executive bonuses to Connecticut’s attorney general, who said the insurer paid out $218 million.

That amount is more than the $165 million in bonuses previously disclosed by the New York-based company. The insurer provided a list of bonus amounts and contract terms to Richard Blumenthal, who said the information supports his view that the basis for paying the bonuses is “completely unjustified,” according to a statement he issued yesterday.

“These contracts rip the rug from under AIG’s excuses -- revealing no basis under Connecticut law for these mega taxpayer-funded bonuses,” Blumenthal said. “AIG’s own documents reveal that it turned an emergency bailout into a meritless handout, paying windfalls to employees as reward for financial failure.”

Blumenthal said he asked AIG’s lawyers to explain the difference in total bonus amounts.

“We don’t know why the numbers are different,” Blumenthal said today in an interview. “That’s what we are asking the company to explain.”

The documents Connecticut received showed that 418 people received bonuses, from $1,000 to $6.4 million, he said. At least 73 people made $1 million or more, and there were seven people who made $4 million or more, Blumenthal said.

“Mr. Blumenthal’s claim that he has discovered additional AIG FP retention payments is incorrect,” said company spokesman Mark Herr in an e-mailed response to questions about AIG’s financial products division from Bloomberg News. “The payments he appears to be referring to were made months ago, have been widely reported on and we specifically disclosed to the Treasury.”

Not Received

The Connecticut attorney general said he hasn’t received the names of those who received the bonuses.

“They did not provide the names because our Freedom of Information Act could be interpreted as requiring a release of that information,” Blumenthal said. “We don’t agree with them that the information would be necessarily released, but they withheld the names and addresses from us.”

Blumenthal said Connecticut has a much stronger Freedom of Information Act law than New York, where that state’s attorney general received the names and said he would do a risk assessment before releasing them.

“They are concerned about security and safety, and so are we,” Blumenthal said of AIG. “The company and we are doing an assessment as to whether there is a real threat.”

Blumenthal said “the documents further undercut their claim they were compelled to pay them,” he said of the bonuses. “There was no requirement of law that they pay them in Connecticut statute.”

Edward Liddy

Blumenthal and Connecticut legislators said yesterday that they have subpoenaed AIG Chief Executive Officer Edward Liddy and other company officials to a hearing on bonus pay.

When Liddy appeared before Congress March 18 for a hearing on AIG bonuses, he reminded lawmakers that he took the CEO job after the U.S. government loaned the company $85 billion in September and said he wouldn’t have approved the bonus contracts if he’d been in charge earlier.

AIG said today in a statement responding to Blumenthal that “a payment under the retention program was made in December before this latest March payment. At this point, not having seen what Mr. Blumenthal said, we believe that’s what he is referring to. The March payments were $165 million, not $218 million.”

Activities at the AIG Financial Products unit in Wilton, Connecticut, will be the topic of a March 26 hearing in Hartford before the state’s Banks Committee, according to a statement from lawmakers.

Lending Markets

The division’s actions have destabilized the mortgage and lending markets in Connecticut, and excessive compensation could have led to employees taking risky measures that caused further destabilization, the legislators said in the statement.

“They put their stamp of approval on bad securities products and sold them like gold,” Democratic state Representative Ryan Barry, co-chairman of the General Assembly’s Banks Committee, said in the statement. “We want to examine the pay structure and fee incentives that led to this quick-sale, high-risk culture and see what regulatory gaps exist that can be tightened.”

Regarding the subpoenas demanding the testimony of Liddy and other AIG officials, Blumenthal said today that “we have not received a response as yet.”

AIG sparked a national furor by paying $165 million in bonuses last week after receiving a $173 billion federal bailout. The U.S. House of Representatives responded to public outrage on March 19 by voting to impose a 90 percent tax on employee bonuses at AIG and other companies that get at least $5 billion in taxpayer bailout funds.

Subpoenas Will Be Served

In addition to Liddy, subpoenas will be served on 11 other AIG executives who are believed to have received bonuses, Connecticut officials said, including Douglas Poling. Poling, an executive vice president, got a $6.4 million bonus, said a person familiar with the bonuses.

New York Attorney General Andrew Cuomo, who also has subpoenaed AIG, said $6.4 million was the biggest individual award of the more than $160 million in bonuses paid on March 13.

Cuomo said March 19 he had received a list of the AIG employees who received bonuses, as he requested by subpoena. Cuomo said he would conduct a risk assessment before making public any of the AIG employees’ names. He said he was aware of security concerns of AIG employees.

Retention Bonuses

Cuomo has said AIG paid retention bonuses of $1 million or more to 73 people of the money-losing unit, including 11 who no longer work at the firm. Alex Detrick, a spokesman for Cuomo, didn’t immediately return a call today about the higher total bonus amount reported by Blumenthal.

In addition to testimony, the Connecticut legislators requested documents about the retention bonus plan and any related contracts and agreements.

“Taxpayers feel misled and manipulated,” Blumenthal said yesterday in his statement. “We must fight, with every legal remedy available, to recapture every cent of these scarce taxpayer resources. AIG relied on contracts and Connecticut law as a flimsy and fatally flawed legal camouflage to reprehensibly enrich employees.”

In a separate matter, an AIG unit was sued on March 18 by Bank of America Corp.’s Countrywide Financial for refusing to pay insurance claims for defaulted loans originated by the mortgage lender. United Guaranty Mortgage Indemnity Co. “announced unilaterally and without justification or excuse that it does not intend to pay any claims for defaults on loans that are part of” 11 mortgage-backed securities, Countrywide said in a complaint filed March 18 in Los Angeles County Superior Court in California.

United Guaranty sued Countrywide the following day in federal court in Los Angeles, claiming the lender misrepresented its underwriting standards for the loans.

To contact the reporter on this story: Karen Freifeld in New York at kfreifeld@bloomberg.net.

Last Updated: March 21, 2009 18:01 EDT