By Chris Kramer
Lawmakers who are now investigating the downfall of American International Group Inc. (AIG) have found that just days after the company received a huge federal bailout, it shelled out $440,000 on a luxury retreat for its executives. The execs were treated to golf outings, spa treatments and banquets during the trip.
AIG laid out the cash for its executives to go to the coastal St. Regis resort south of Los Angeles. At the same time, the company was tapping into an $85 billion loan from the federal government.
The insurance giant was taking money from the federal government in order to avoid filing bankruptcy, yet paid tabs including $23,380 worth of spa treatments for its employees, according to an Associated Press report.
The resort turned over invoices detailing AIGs spending to the House Oversight and Government Reform Committee.
While the trip did not include any employees from the financial products division that nearly finished AIG, lawmakers were still outraged over the many thousands of dollars the company spent on the retreat for the executives.
The committee's chairman, Rep. Henry Waxman, had harsh words for the company about the retreat during an opening statement at a recent hearing.
Others, including Barack Obama, also found the company retreat inappropriate and completely out of line.
However, Eric Dinallo, superintendent of the New York State Insurance Department, said that he can see the value of the retreat under the circumstances.
Dinallo thinks that if employees and underwriters had fled the company it would have been disastrous. Therefore he understands the need to spend big bucks wining and dining them, even as the company was on the brink of Chapter 11 bankruptcy (a reorganization similar to Chapter 13 for individuals) and being thrown a life preserver by the federal government.
At the House Oversight and Government Reform Committee hearing, it was disclosed that AIG executives were deceptive and concealed the full range of its risky financial products from auditors as losses built up.
The former top AIG executives are playing the blame game and all pointing at each other.
All of their antics were criticized by the panel.
Because AIG was so crippled by huge losses, it was forced to take the $85 billion government loan in September. The loan gives the U.S. the right to an 80 percent stake in the company.
Three former AIG executives were summoned to appear at the House Oversight and Government Reform Committee hearing. One of those summoned was Maurice "Hank" Greenberg. Greenberg ran AIG for 38 years until 2005.
Greenberg canceled his appearance at the hearing due to an apparent illness, but coincidentally had prepared testimony ready that was submitted to the committee.
In Greenberg's testimony, he blames AIGs financial problems on his successors, Martin Sullivan and Robert Willumstad, the recently fired CEOs of the company.
Sullivan and Willumstad say that the blame lies on the accounting rules that forced AIG to take tens of billions of dollars in losses stemming from mortgage-related securities.
So, no one is actually accepting the blame for AIG's failure that has cost taxpayers $85 billion.
Perhaps the executives discussed the matter during their posh retreat, in between spa treatments. That's doubtful, but even if they did - there are still no answers.