AIG Sought Change in Tone in Feinberg Talks, Document Shows

American International Group Inc. (AIG) sought to assuage regulators as the insurer met with paymaster Kenneth Feinberg after being criticized for awarding bonuses amid its rescue, according to records released this week.

AIG was seeking “changes in tone and the content of the rhetoric,” the insurer said in a document obtained by Judicial Watch through a Freedom of Information Act request. “The people who are here are trying to right historically successful businesses and fix the problems.” AIG’s so-called talking points were prepared for a Nov. 3, 2009, meeting with Feinberg.

AIG was working to quash furor over retention payments to staff at its derivatives unit and win flexibility to reward its top employees a year after it was bailed out. President Barack Obama called the $165 million payment to executives at the insurer’s Financial Products unit in March 2009 an “outrage” and asked Treasury Secretary Timothy F. Geithner to pursue blocking the bonuses or recouping the money.

“It was very tense” after the government bailed out private companies in 2008, Jeanne Branthover, a managing director at Boyden Global Executive Search Ltd. in New York, said in an interview. Over time “we saw major changes take place and the government started backing off.”

The Financial Products unit brought AIG to the brink of collapse with bets on subprime mortgages. AIG received a bailout that swelled to $182.3 billion after regulators said letting the company fail would damage the U.S. economy.

Redacted Information

About three-quarters of the document obtained by Judicial Watch was redacted. The Treasury had previously released 44 pages in connection with the group’s request. Records included e-mails between AIG and the government detailing arrangements for the Nov. 3 meeting. Judicial Watch, a group that advocates for government transparency, obtained the talking points separately after a court ordered the Treasury to release it.

The Obama administration “didn’t even want to tell us who at AIG they were talking to about this,” said Judicial Watch President Tom Fitton, in an interview. “The taxpayer has no way of getting an account of what went on.”

The Treasury had argued in the lawsuit that some documents should be redacted or withheld because they contained information that might allow AIG’s competitors to hire away its employees. U.S. District Judge Beryl Howell agreed and allowed the Treasury to keep some records confidential.

Poaching Employees

“A detailed picture of AIG’s compensation structure would” make poaching easier, Howell wrote in an Aug. 16 opinion. The Treasury “has produced all reasonably segregable responsive portions of all documents at issue.”

Representatives from the Treasury, Federal Reserve Bank of New York and AIG’s board of directors were also scheduled to attend the meeting, according to the talking points. The document includes introductory remarks from then-AIG Chairman Harvey Golub.

Mark Herr, a spokesman for New York-based AIG, declined to comment or provide an unredacted version of the talking points. Feinberg, who left the Treasury last year, declined to comment, as did Mark Paustenbach, a Treasury spokesman.

AIG Chief Executive Officer Robert Benmosche, 67, told employees in 2009, that Andrew Cuomo, then New York’s attorney general, was wrong for drawing attention to bonus recipients.

“What he did is so unbelievably wrong,” Benmosche said during the Aug. 11, 2009 remarks, according to a record obtained by Bloomberg. “He doesn’t deserve to be in government, and he surely shouldn’t be the attorney general of the state of New York. What he did is criminal. You don’t create lynch mobs to go out to people’s homes and do the things he did.” Benmosche later said he regretted his remarks. Cuomo is now governor.

Repaying Government

Almost four months after the Nov. 3 meeting, Golub said Feinberg’s attempts to limit compensation may hamper the insurer’s ability to pay back the government.

“In some cases we are prevented from providing market- competitive compensation to retain some of our most experienced and best executives. This hurts the business and makes it harder to repay the taxpayers,” Golub said in a letter to AIG shareholders posted on the insurer’s website in February 2010.

AIG repaid the remaining $21 billion it owed to the Federal Reserve Bank of New York, and the Treasury converted its preferred stake into 92 percent of AIG common stock in January. The holding was reduced to 77 percent in a May share sale.

AIG had originally committed $475 million in retention pay for Financial Products employees. Feinberg won $39 million in concessions from the workers as of February 2010.

To contact the reporter on this story: Noah Buhayar in New York at nbuhayar@bloomberg.net

To contact the editor responsible for this story: Dan Kraut at dkraut2@bloomberg.net.

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