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Cummings Requests Congressional Hearing to Investigate AIG
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Washington, D.C. — Today, Congressman Elijah E. Cummings (D-Md.), a senior member of the House Committee on Oversight and Government, sent the following letter to Committee Chairman Edolphus Towns (D-N.Y.) and Ranking Member Darrell Issa (R-Calif.) requesting a Congressional oversight hearing to examine recent actions of insurance giant AIG—the government bailout of which has cost taxpayers $152 billion (text of the letter below). The Congressman is specifically concerned about:
Text of the Letter: December 16, 2008 The Honorable Edolphus Towns The Honorable Darrell E. Issa Dear Chairman Towns and Ranking Member Issa: I write today to request that you convene in the full Committee on Oversight and Government Reform a hearing to examine American International Group, Inc.’s (AIG) use of taxpayer dollars, specifically with regards to compensation policies and expenditures and corporate events. I make this request for the reasons outlined below. In a series of letters to AIG, I have repeatedly requested information from the firm about the compensation it is providing to its employees – and particularly about the so-called "retention payments" the firm is apparently awarding. By AIG’s account, these retention payments were approved by AIG for award to the firm’s employees by the Compensation Committee of AIG’s Board of Directors on September 18. On September 22, AIG’s retention program was disclosed to the public in an 8-K filing made by the firm with the Securities and Exchange Commission (SEC). In that filing, AIG stated that the retention program "applies to approximately 130 executives and consists of cash awards payable 60 percent in December 2008 and 40 percent in December 2009." On approximately November 25, AIG announced that it would not award bonuses to its top executives in 2008. Presumably pursuant to this decision, in a form 8-K filing made with the SEC and dated November 24, AIG disclosed the following: "On November 24, 2008, the Executive Officers of American International Group, Inc. ("AIG") who participate in its previously disclosed retention program, including Chief Financial Officer David Herzog and Executive Vice President Jay Wintrob, volunteered to delay payments thereunder, with the first installment being delayed from December 2008 until April 2009 and the second installment being delayed from December 2009 until April 2010. Chairman and Chief Executive Officer Edward M. Liddy does not participate in this program." In a letter I sent to AIG on December 1, 2008, I posed the following questions to AIG’s Chief Executive Officer, Edward M. Liddy, regarding the retention payments.
Responding to my letter, AIG provided only the following information in a letter dated December 5, 2008:
I then wrote to AIG on December 9 and requested, in addition to other information, that AIG answer the following questions:
Now a Bloomberg story authored by Hugh Son dated December 12 suggests that AIG is actually giving retention payments to at least 2,000 employees – rather than the 168 employees AIG had identified in correspondence to me (or the 130 employees disclosed to the SEC in September). Additionally, the story indicates that those to whom the payments were offered were required to keep the payments secret; if the payments were revealed, those individuals receiving the payments could apparently be required to forfeit them. At this time, I believe that the Committee should compel Mr. Liddy to testify under oath so that he can fully and completely explain AIG’s compensation policies and expenditures, including the extent to which bonuses of any kind are being awarded in 2008 (and contemplated for award in 2009), and the full extent of the retention payment program announced by AIG. Additionally, I note that AIG executives have stated to my staff that the firm has negotiated conditions with federal officials regarding its compensation policies. I think it is critical that the Committee seek to understand (1) whether AIG has revealed the full extent of its compensation policies to officials with either the Department of the Treasury or the Federal Reserve and (2) whether, if the Federal Reserve and/or the Department of the Treasury are fully aware of AIG’s compensation policies, either or both has approved AIG’s issuance of retention payments (or any other type of bonuses) as part of the firm’s compensation package. For that reason, I would urge that officials from these entities should also be called to testify at a hearing that examines AIG’s compensation policies. Further, I am extremely concerned with ongoing reports that AIG continues to host luxury junkets on the taxpayer’s dime. In an Oversight and Government Reform Committee hearing in October 7, I expressed deep concern over a $443,343 executive retreat hosted by the company. In response to my questioning, Mr. Liddy sent a letter on October 30 indicating that AIG was canceling more than 160 corporate events. Unfortunately, media reports in the same time period told a different story. Specifically, I am deeply troubled by reports of a corporate event in early November at Squaw Peak Hilton in Phoenix, Arizona, where the company took deliberate steps to remove its name from any signs at the event in an effort to "maintain a low profile." Media reports indicate that the event in Phoenix cost about $343,000 but AIG has claimed it covered only about $23,000 of this cost, with "corporate sponsors" financing the difference. Yet, at least one of these "corporate sponsors" is an AIG subsidiary company. I am also extremely concerned that in a telephone call with me as well as on a national television interview with CNN’s Larry King, Mr. Liddy insisted that no AIG executives attended the Phoenix event – but the media reports make it clear that at least eight AIG executives were in attendance. These executives reportedly spent the majority of their time on non-business-related activities, and they were reported to fly out days before registration even began. I am very interested in getting some clarity on this matter. Documents provided by AIG to the Oversight Committee indicate that expenditures on AIG corporate functions totaled $138 million from the first of the year to November 6. Events have continued to occur since the first bailout. They range in size from $100 to several million dollars and they have been staged all over the world. Several of these events present a cause for concern, including an October 5 "Pheasant Hunt" event at the Plumber Manor in Dorset, England which cost approximately $93,255 and is listed as a "client/broker meeting" with 3 employees present and 21 total attendees. Any ongoing investigation into AIG should include an assessment of these events. U.S. taxpayers now own a nearly 80 percent stake in AIG – and yet there is essentially no information available either to the Congress or to the U.S. public regarding how exactly AIG has expended the taxpayer funding provided to it. As representatives of the taxpayers that are literally keeping AIG afloat, Congress has the right and indeed the duty to demand from AIG a full accounting of the funds provided to it. Therefore, I strongly urge you to convene a hearing as soon as possible in the 111th Congress to continue the Committee’s inquiry into AIG’s use of taxpayers’ money. Thank you for your consideration of this request. If I can provide any additional information about this matter, please do not hesitate to contact me or my staff member, Danielle Grote, at 202-225-4741. Sincerely, Elijah E. Cummings |
