U.S. Wants A.I.G. to Hold Back on Bonuses

From the New York Times
By MARY WILLIAMS WALSH
The special federal paymaster is trying to persuade the American International Group, the insurance giant, to reduce a coming bonus payment of $198 million, but is running into legal hurdles despite rules curtailing bonuses at companies receiving assistance from the Treasury.

The Treasury’s special master for compensation, Kenneth Feinberg, has “informally advised A.I.G. not to pay the full $198 million,” according to a new audit of A.I.G.’s compensation and the government’s role in overseeing the program.

The audit did not reveal how firmly Mr. Feinberg had told A.I.G. to scale back the bonuses. It said, however, that he could not simply impose a decision because the bonuses were “outside the scope” of the executive compensation rules that were issued for troubled companies in February and June. Instead, Mr. Feinberg was said to be negotiating reductions with A.I.G., with the help of the Federal Reserve.

The new audit of A.I.G.’s compensation program was issued by the office of the special inspector general for the Troubled Asset Relief Program. It is scheduled to be the subject of a hearing Wednesday by the House Oversight and Government Reform Committee. The audit also found that $26 million had yet to be recovered from a previous clawback of $45 million. A spokeswoman for A.I.G., Christina Pretto, said in a statement that the people still holding that money had “until the end of the year to fulfill their commitments to return a portion.”

A.I.G. has received a series of bailouts from the federal government that have totaled $182 billion. A report by the Government Accountability Office in late September said the bailout packages had succeeded in breaking A.I.G.’s calamitous fall and had produced signs of improvement in its insurance businesses. But the company’s ability to restructure and survive over the long term depends on “market conditions and continued government support.”