Securities Law Prof Blog

Editor: Eric C. Chaffee
Univ. of Toledo College of Law

Wednesday, March 18, 2009

AIG's Liddy Testifies on Bonuses

AIG CEO Edward Libby is still testifying before the House Financial Services Committee and explaining why AIG had to pay those bonuses.  Perhaps the only noteworthy new information is that Liddy asked recipients of bonuses in excess of $100,000 to give back at least one-half of the bonus.  Otherwise, the Representatives have, in turn, expressed outrage over the bonuses, credit default swaps (one Representative expressed outrage that CDSs were unregulated, apparently unaware that was an explicit Congressional decision), the AIG FP division, and the financial meltdown, more generally.  Whatever one thinks of the business judgment that led Liddy to permit the bonuses to be paid, he has conducted himself with patience and dignity during this long hearing, as he has continually had to explain over and over the reasons for paying the bonuses.   (I'm not justifying the payment, but really how many times does the man have to repeat himself?)

Here is New York AG's response to Liddy's testimony:

"AIG’s proposal to ask their bonus recipients to voluntarily give back half is simply too little too late.  Mr. Liddy’s proposal to take half back from those who got more than $100,000 will cover some 298 out of 418 bonus recipients.  Rather than take half-measures, AIG should immediately turn over the list, which we have subpoenaed, of who got what and when. 

The American people have a right to know what is happening with massive amounts of their money.  Mr. Liddy needs to understand this.  If AIG is really serious about getting these bonuses back, they should comply with the subpoena we have issued.  Mr. Liddy said at the hearing today, in response to Congressman Gary Ackerman’s question, that AIG will comply with our subpoena, but we have still received nothing from them.  If AIG has nothing to hide and is not embarrassed about these payments, they should turn over the list now.  The era of shrouding huge bonuses in secrecy must end. 

We prefer not to go to court on this matter, but AIG is leaving us little choice.  I hope the leadership at the company comes to its senses now.”

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