Cuomo warns AIG over year-end bonuses
Tue Nov 18, 2008 6:00pm EST
By Grant McCool
NEW YORK (Reuters) – New York Attorney General Andrew Cuomo warned American International Group Inc (AIG.N) on Tuesday of “significant legal ramifications” over executive bonuses as part of his drive to force rescued firms to drop year-end payments.
“Please inform my office as soon as possible what AIG plans to do with respect to executive bonuses and pay raises this year,” Cuomo wrote in a letter to AIG Chief Executive Officer Edward Liddy. “As you know, I believe AIG’s decision has significant legal ramifications.”
Public outrage over lavish banker pay has prompted Goldman Sachs (GS.N) and UBS (UBSN.VX) to announce their executives would not be receiving year-end bonuses.
Bonuses have been strongly criticized as U.S. taxpayers, suffering the worst financial crisis since the Great Depression, question the U.S. Treasury Department’s $700 billion bailout of the industry that played a large role in creating the crisis.
Cuomo and California Congressman Henry Waxman are investigating executive pay, putting pressure on firms over their policies of paying out millions of dollars in bonuses to executives each year.
In his letter to Liddy, Cuomo said, “it seems hard to imagine that AIG could pay significant bonuses or give raises to its executives after the company has quite literally been bailed out by the American taxpayer.”
Cuomo said in a statement on Monday that it was time for the rest of Wall Street “to look in the mirror” and follow UBS and Goldman Sachs. He said Citigroup (C.N), which is cutting 52,000 jobs, should announce quickly that top executives will not receive bonuses.
Earlier in November, the U.S. government invested $125 billion in Goldman, Citigroup and seven other large U.S banks. Companies receiving funds agreed to restrictions on executive compensation.
Compensation for executives below the very top level is not disclosed, but banks are expected to cut their bonuses by 50 to 70 percent compared with last year.
(Additional reporting by Joseph Giannone; Editing by Bernard Orr)