Nov. 1, 2008: “Have your benefits team made any progress on the ‘soft’ issues, or heard anything from the fed [sic] on the bonus situation?” a Treasury official wrote in an e-mail about the transaction.Before you jump on the report and say this happened during the Bush administration, remember that the person who worked on the bailout was the guy who ran the NY Fed, one Timothy Geithner. Below is a video report of the Fox "find":
EXCLUSIVE: Treasury, Fed Reviewed AIG Bonus Info Months Ago
Peter Barnes, Senior Washington Correspondent
As Congress and the Obama Administration consider legislation to limit bonuses at American International Group (AIG), documents obtained by FOX Business show AIG bonuses and other compensation were reviewed and changed by officials at the Treasury Department and Federal Reserve in November, when the Treasury made its first investment of taxpayer funds -- $40 billion -- in the company.
Nov. 1, 2008: “Have your benefits team made any progress on the ‘soft’ issues, or heard anything from the fed [sic] on the bonus situation?” a Treasury official wrote in an e-mail about the transaction.
Despite their deliberations at the time, the Treasury and Fed officials, which were part of the Bush Administration, eventually decided to restrict compensation on just the top 75 company executives--and some of them may still have received hefty bonuses.
The e-mails are included in thousands of Treasury documents obtained by FOX Business under a Freedom of Information Act lawsuit filed by the network for details of the department’s work on the $700 billion Troubled Asset Relief Program, or TARP. Many details from the documents were eliminated because Treasury argued they contained “privileged” information.
All in November: Many of the Treasury e-mails discuss compensation at AIG, particularly for top executives, including compensation for CEO Edward Liddy, a former insurance-company executive who agreed to take the top job at the company in September.
Nov. 25: “Do you/Treasury want to be involved in helping design/discuss Ed Liddy’s comp package?” one e-mail said.
In November, AIG announced that Liddy would receive an annual base salary of $1 for 2008 and 2009. The rest of his compensation, the company said, would consist of “equity grants.” He also would not receive bonuses for 2008 and 2009, “although he may be eligible for a special bonus for extraordinary performance payable in 2010,” AIG said. It also said he would not be eligible for severance payments.
In its negotiations with government officials in November, AIG submitted a “compensation proposal” to them, the e-mails indicate. The emails also indicate compensation provisions were changed several times. One e-mail, from a law firm that worked on the transaction, stated, “Please find attached our comments to the compensation-specific provisions…In a few instances, we have added comments to explain the thinking behind certain changes.”
In another e-mail, a person working on the transaction wrote, “We should get the term sheet to the company this morning. Because the comp section is still in real flux, we will take the content out of the draft to AIG.” The person added that the “cover e-mail” to the company “will contain the TARP…limitations plus additional restrictions we will get them in the very near term.” The person also wrote, “Comp people -- please keep that moving and send around a new draft of that section with an explanation for the recommendations.”
Under terms of the revised bailout in November, the government applied “stringent” limitations on compensation on AIGs top five senior officers, as required under TARP legislation, according to a Treasury document. But Treasury took an additional step in compensation provisions, requiring limits on “golden parachute” severance packages and a freeze on the size of the annual bonus pool for the next top 70 company executives as well.
However, in the details of the term sheet on the assistance, officials specified that the annual bonus pools to the next 70 senior managers – called “senior partners” – for 2008 and 2009 “shall not exceed the average of the annual bonus pool paid to Senior Partners for 2006 and 2007.
According to company financial documents filed with the Securities and Exchange Commission, as of November 12 last year, the balance in the senior partners plan was about $6 million. The term sheet also indicates senior partners were eligible for AIG’s “historical quarterly bonus program” as well.
In their efforts to limit compensation at AIG, Treasury officials appeared concerned over accounting for it to a critical Congress. In one exchange of e-mails between David Nason, an assistant Treasury secretary, and Jennifer Zuccarelli, a public affairs officer, discussed televised testimony before Congress in December by Neel Kashkari, the Treasury official managing TARP:
Nason: How’s it going?
Zuccarelli: Bad. Serious questions, too, not “chump” type questions. They’re going to start to break Neel down soon, I’m getting worried he’s going to start snapping.
Nason: This AIG stuff is tough to watch.
Zuccarelli: They killed him on exec comp. He didn’t know answer.
Congress is considering legislation to limit bonuses at AIG after the company and Treasury disclosed it paid $165 million in 2008 bonuses last week to 400 employees at the AIG’s financial products unit, the division that nearly put the company into bankruptcy last year because it sold insurance coverage on risky securities held by other financial firms.
The Treasury and Fed have committed more than $170 billion to AIG as it seeks to restructure and sell assets. The latest version of the bailout includes a Treasury commitment to invest another $30 billion in the company. AIG has not tapped the funds yet. Treasury officials say they are negotiating tougher limits on bonuses as a condition for dispensing it.
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