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AIG Financial Products Corp. : Financial Crisis CBS Video re AIG : 2008 Employee Retention Plan posted at Scribd

By Andis Kaulins

The monies paid out by A.I.G. to members of its financial products group - who are most answerable for the financial collapse of AIG prior to the bailout - were clearly the result of irregularities even prior to the current bailout. The members of this group plundered AIG by gigantic amounts for a small circle of recipients.

As Robert Lenzner writes at The Croesus Chronicles in Why Wasn't AIG Hedged?

"By AIG's own description, about $379 billion of the $527 billion in AIG's default swap portfolio "represents derivatives written for financial institutions, principally in Europe, for the purpose of providing them with regulatory capital relief rather than risk mitigation."

AIG's financial products unit, run by Joseph Cassano since 1988, was a veritable money machine, pouring $6 billion of riches into AIG's coffers from 1988 until 2005. Croesus has been told [former Chairman Hank] Greenberg gave Cassano and his group a share of the profits from this operation.

According to The Times, compensation ranged from $423 million to $616 million for Cassano's group. That would be about 20% of the unit's revenue, meaning Cassano was being paid like a hedge fund manager." [links added by LawPundit]

In fact, it was not 20% but 30%. As Workers' Comp Insider writes:

"Keep in mind that his salary and bonus were based on the scale of business generated by his virtually unmonitored unit. Cassano and his colleagues siphoned off 30 percent of every dollar generated in his (non insurance) division. The more they wrote, the more they made. And because AIG was so well collateralized, the company did not have to back up the risks with outside capital. Sweet. Like stealing candy from a blind man, right?"

With those kinds of bonuses, employees at AIG had every incentive to insure everything in the universe, the more the better, regardless of the risks involved, since the employees then ransacked the resulting pot for their percentage share of whatever they sold.

Michael Daly at the Daily News writes:

"Before he was finally fired last March, Cassano pocketed $280 million in cash and an additional $34 million in bonuses.

Under a "retirement" agreement marked "confidential," Cassano also got a $1 million-a-month "consulting fee."

AIG subsequently cut off these payments, but Cassano still walked away with more than $315 million while the company staggered under $440 billion in liabilities. Taxpayers had to pour in $170 billion in bailout money."

In this regard, the staff of Representative Barney Frank, the chairman of the House Financial Services Committee, has, according to the Deal Book at the New York Times, posted the AIG Financial Products Corp. 2008 Employee Retention Plan to Scribd.

Full post as published by LawPundit on March 25, 2009 (boomark / email).