AIG Exec Departures: What a Surprise! 34 comments
Wellington Financial
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I had a hard time explaining to Gregg Jarrett on Fox News (see prior post “O.K., to be crystal clear on AIG’s bonuses….” March 22-09) that many of the folks who were still plying their trade in the Financial Products Group at AIG actually mattered, had other career choices, and should be retained to defuse the US$1.7 trillion bomb that is now AIG. How else would the U.S. Taxpayer hope to get their US$175 billion loan back from AIG? This was heresy last week.
Fortunately, the Gods have shined this week and two different data points have emerged supporting this unpopular theory (and it’s only Thursday).
First there was the wonderful, open resignaton letter to the New York Times from Jake DeSantis, an EVP (oh, the joys of having “F.U.” money set aside). Here’s an excerpt:
I am proud of everything I have done for the commodity and equity divisions of A.I.G.-F.P. I was in no way involved in — or responsible for — the credit default swap transactions that have hamstrung A.I.G. Nor were more than a handful of the 400 current employees of A.I.G.-F.P. Most of those responsible have left the company and have conspicuously escaped the public outrage.
After 12 months of hard work dismantling the company — during which A.I.G. reassured us many times we would be rewarded in March 2009 — we in the financial products unit have been betrayed by A.I.G. and are being unfairly persecuted by elected officials. In response to this, I will now leave the company and donate my entire post-tax retention payment to those suffering from the global economic downturn. My intent is to keep none of the money myself.
I take this action after 11 years of dedicated, honorable service to A.I.G. I can no longer effectively perform my duties in this dysfunctional environment, nor am I being paid to do so. Like you, I was asked to work for an annual salary of $1, and I agreed out of a sense of duty to the company and to the public officials who have come to its aid. Having now been let down by both, I can no longer justify spending 10, 12, 14 hours a day away from my family for the benefit of those who have let me down.
Then this story from AIG France (via the WSJ). It seems that there are still plenty of sought-after people at AIG, as I argued on Fox last Saturday (see prior post “Fox News interview tomorrow” March 20-09):
Amid the flap over bonuses at American International Group Inc. two of the company’s top managers in Paris have resigned. Their moves have left the giant insurer and officials scrambling to replace them to avoid an unlikely but expensive situation in which billions in AIG trading contracts could default.
Representatives of the Federal Reserve, AIG’s lead U.S. overseer, are talking with French regulators and AIG officials to deal with the consequences of a complicated legal scenario in which the departures of the managers in Banque AIG, a subsidiary of AIG’s Financial Products unit, could trigger defaults in $234 billion of derivative transactions, according to people familiar with the situation and a document AIG provided to the U.S. Treasury.
Defaults, by no means inevitable, could not only hurt AIG but also could force European banks involved in the trades to raise billions in capital to cushion potential losses, according to AIG documents.
The departure of just two individuals from AIG might mean a blow-up of US$234 billion of derivative contracts, requiring European banks to raise billions in new capital? Wow. I look forward to seeing Gregg Jarrett tackle the topic on Fox News again this weekend.
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I challenge Mr DeSantis to publish his 2009 income tax returns as proof that he is really working for $1 a year, and that he donated his retention bonus to charity. (He got his bonus in 2009).
On Mar 26 03:27 PM Nuh-huh wrote:
> Some people would rather carry pitchforks & torches than actually
> learn something... Here it is folks: Jake DeSantis was asked to stick
> around for a salary of ONE DOLLAR plus the retention bonus by YOU
> the people of the United States, who OWN the company. He agreed.
> Now he spent his time trying to save YOU the owner BILLIONS of dollars,
> and now you want to burn him at the stake.
> You need to realize he wasn't working for $200/hour PLUS the bonus.
> He was working for $1/Year PLUS the bonus. The bonus was his ONLY
> compensation for agreeing to stay on and save YOU the owner billions
> of dollars. He was free to walk, and apparently he should have you
> ungrateful jerks.
> You should be ashamed of yourself.
Is it really patriotic duty that motivates people like Jake DeSantis and Edward Liddy to work for $1 a year? Or is it the perks and bonuses and whatever else they can get?
I challenge Mr. DeSantis to publish his 2009 tax returns as proof that he is really working for $1 a year, and that he contributed his "retention" bonus to charity!
The entire middleman industry was built upon hiding or misstating risks to ensure quick fee-making transactions, or to make reckless bets with other peoples' money. And then, suddenly, it didn't work out. All the professionals in risk/reward management screwed up, presumably Mr. DeSantis among them.
Yet somehow, even now, these losers have themselves convinced that they are exempt from downside risk. The one inviolate principle among these people remains: under no circumstances should investors, gamblers or risk-hiding middlemen actually take a loss. Only taxpayers should take real losses.
A taxpayer who has routinely worked 10-12- and 14 hours a day throughout much of my career, I now expect to have to work longer into what would have been retirement years, I now several generations worth of Americans to live a lower quality of life due to the actions of these people.
In the face of these sacrifices, I hope to see a generation's worth of executives career's destroyed.
"Deserves got nothin to do with it."
Clint Eastwood in "Unforgiven"
This is about what we are in danger of becoming, as a people.
YOUR Treasury Secretary and YOUR Congress explicitly authorized the AIG bonuses. They knew all about the bonus situation (even helped create it) and could have and should have stopped it. When the bonuses became known to the public, what did Dodd and Gaithner do ? They lied about it. Flat out lied. Then they got caught in their lies, and suddenly we have an "outraged" President and a house of Representatives that passes a dispicable, disgraceful and unconstitutional Bill of Attainder, targeting a small group of citizens to steal their property.
The clown whose fingerprints are all over this crisis, Barney Frank, holds yet one more dog & pony show demanding the names of those who received bonuses, and refusing to promise CEO Liddy that he will not release those names to the public.
And then we have death threats against AIG employees, and a group of real morons/agitators starts a bus tour of AIG exec homes.
The first people that need to be dealt with in this mess are the incompetents in our government who approved those bonus contracts and then lied to us. And, by the way, these are the very same incompetents and thieves who have been playing the taxpayers for suckers for decades, while letting their buddies like Raines, Johnston and Gorelick loot Fannie and Freddie for over $100 million.
The employees at AIG receive their bonuses after they complete their employment contract. Most had absolutely nothing to do with the financial mess, and , to my knowledge, none of them publicly and repeatedly lied to us like our representatives did. They may not have "earned" a bonus in the eyes of many (myself included), but they honored their contracts and they didn't lie to us like Dodd and Gaithner.
The outrage about the bonuses is justified-- but it is seriously misdirected.
Dato
On Mar 26 09:18 PM elwhip wrote:
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> </span>. Assume <span title="Convert this amount" class="currency_conver...
> </span> weeks a year - no vacations with the fam. That's <span title="Convert
> this amount" class="currency_conver... hours a
> year - into - say - $ <span title="Convert this amount" class="currency_conver...
> </span>million.. That's still approx $<span title="Convert this amount"
> class="currency_conver...
Dato
IRS giving relief to some Madoff investors
By MARCY GORDON, AP Business Writer
WASHINGTON – The Internal Revenue Service issued guidelines Tuesday that will allow tax relief and refunds for some Bernard Madoff victims who were levied for investment earnings that turned out to be nonexistent.
IRS Commissioner Douglas Shulman told Congress the guidelines are for taxpayers who have suffered losses from Ponzi investment schemes such as the massive Madoff swindle.
Madoff investors should have reported earnings from their investments with him through the years and thus paid taxes on those earnings. Given that some of those were “phantom” profits, investors have said they should be entitled to refunds of the taxes they paid.
Investors in some of these cases are entitled to a “theft-loss” deduction, not subject to the limits on normal capital losses from investments, according to the IRS guidelines, Shulman testified at a Senate Finance Committee hearing.
The theft-loss deduction can be taken in the year a fraud is discovered, except to the extent an investor has a “reasonable prospect” of recovering the lost money, Shulman said.
Determining the amount and timing of losses from Ponzi schemes is “factually difficult” and it can take years to determine the prospects for recovering the lost money, he noted.
In Ponzi schemes, early investors are paid returns from money put in by later investors.
“Some taxpayers have argued that they should be permitted to amend tax returns for years prior to the discovery of the theft to exclude the phantom income and receive a refund of tax in those years,” Shulman testified. The new IRS guidelines do not address that argument, he said.
Sen. Charles Schumer, D-N.Y., a member of the Finance Committee who has been pushing for tax relief for victims of Ponzi schemes, said that with the new guidelines the IRS “has done the right thing here.”
“In most every area where there was a major dispute, they have sided with the victims,” Schumer said. “These victims were not only sophisticated financial professionals, but also ordinary people who believed they were making safe, responsible investments for their future. The steps announced today mean victims won’t owe taxes on income they never received.”
To date, about $1 billion in assets have been identified for Madoff investors, a tiny portion of the $65 billion he told his 4,800 investors that he had on hand in November. Authorities say they believe the figure included what would have existed if much smaller original investments had grown for decades.
By some estimates, the IRS could be out as much as $17 billion in lost tax revenue from refunds to investors who earned fictitious profits in the Madoff scheme.
The 70-year-old disgraced money manager and former chairman of the Nasdaq Stock Market has been living in a small cell at the Metropolitan Correctional Center in lower Manhattan since he pleaded guilty Thursday to securities fraud, perjury and nine other charges. He could be sent to prison for up to 150 years at a June sentencing.
The Securities Investor Protection Corp., the industry-funded organization that steps in when brokerage firms fail, has begun sending out the first checks to Madoff victims. Investors are eligible for up to $500,000 from the organization and have until July to file claims.
Around $1.6 billion or so is currently available to SIPC.
Shulman said that investors should deduct the $500,000 they receive from SIPC from the amount they claim as a “theft loss” from their Madoff investment.
The IRS expects that statements provided to investors by Madoff’s fund, showing the amounts they invested, should be sufficient documentation to establish losses for filing tax claims, he told the hearing.
On Mar 27 04:10 AM Mr. Ed, Jr. wrote:
> Do AIG employees deserve bonuses ?
>
> "Deserves got nothin to do with it."
> Clint Eastwood in "Unforgiven"
>
>
> This is about what we are in danger of becoming, as a people. <br/>
>
> YOUR Treasury Secretary and YOUR Congress explicitly authorized the
> AIG bonuses. They knew all about the bonus situation (even helped
> create it) and could have and should have stopped it. When the bonuses
> became known to the public, what did Dodd and Gaithner do ? They
> lied about it. Flat out lied. Then they got caught in their lies,
> and suddenly we have an "outraged" President and a house of Representatives
> that passes a dispicable, disgraceful and unconstitutional Bill of
> Attainder, targeting a small group of citizens to steal their property.
>
>
> The clown whose fingerprints are all over this crisis, Barney Frank,
> holds yet one more dog & pony show demanding the names of those
> who received bonuses, and refusing to promise CEO Liddy that he will
> not release those names to the public.
>
> And then we have death threats against AIG employees, and a group
> of real morons/agitators starts a bus tour of AIG exec homes.
>
> The first people that need to be dealt with in this mess are the
> incompetents in our government who approved those bonus contracts
> and then lied to us. And, by the way, these are the very same incompetents
> and thieves who have been playing the taxpayers for suckers for decades,
> while letting their buddies like Raines, Johnston and Gorelick loot
> Fannie and Freddie for over $100 million.
>
> The employees at AIG receive their bonuses after they complete their
> employment contract. Most had absolutely nothing to do with the financial
> mess, and , to my knowledge, none of them publicly and repeatedly
> lied to us like our representatives did. They may not have "earned"
> a bonus in the eyes of many (myself included), but they honored their
> contracts and they didn't lie to us like Dodd and Gaithner.
>
> The outrage about the bonuses is justified-- but it is seriously
> misdirected.
>
>
>
>
>
>
Maybe what we need is total transparency and come honcho from Wall Street to tell us honestly about the construction of AIG and how it needs to be de-conglomerated, each unit split off so that WE the Owners can see what WE bought through our surrogates in Congress. Or is that too much for them to do?
On Mar 26 11:31 AM I weep for this country. wrote:
> People we own AIG! Why are we trying to destroy it? It should be
> unamerican to bash the good people at AIG who are now working there
> knowing how bad they are perceived and yet staying loyal to the company.
> Keeping good employees who see some future in their current roles
> in the only way we will see any of that money that Congress decided
> to give to Goldman and France. Remember the people who caused the
> crisis left! And most of AIG is made up of good, solid insurance
> units that up until now were making money. But this grandstanding
> is now hurting that part of the business that had nothing to do with
> Financial Products whatsoever and which hold the key to taxpayers
> recouping what the Fed gave to the counterparties!
No. No way. Must be the fault of free market, capitalism, greed, deregulation, and Peter Schiff.
I eagerly await my turn to parade in front of Capital Hill demanding Congressional salaries be taxed at 90% when THEY fail. But they didn't exactly sign up to deliver anything did they? D'oh!!
When did they decide that all these people that have left did something wrong?
Clearly AIG lacks as a company a code of conduct. After 11 years with the company DeSantis knew the INs and OUTs of this unit.
When did they know that someone was doing something wrong?
Did they violate company policy?
Did they violate any laws?
Did they violate company proceedures?
Did any of these people actualy got fired?
Did AIG have any polocies and proceedures covering the activities of the FP unit?
Seems to me that this AIG unit was operating in uncharted teritory making up the rules as they went along. Perhaps Mr DeSantis should have provided evidence to the state attorney's office of any wrong doing by these departed employees.
But was there any wrongdoing?
As long as this unit showed profits who at AIG cared if they followed proper company policy or if they operated with it the law. How fitting to point the finger at some one who is not there. I have NO sympathy for DeSantis or the rest of the theives and crooks at AIG because they cover for each other, they take no responsibilty for what they did, and they abuse the taxpayer trust.
But the knives and pitchforks crowd at least has gotten some attention as to the general state of outrageous executive compensation inthis country in general. Corporate governance has been awful in this regard, and the shareholders that rank, institutions, just log roll the issue and are all too happy about it.
I think Desantis is right. Vast majority of americans are just blind about this whole thing.
A good boss is worth every dime to both his/her team, the company, and the customers. THAT is what you pay for.
I heard there were quite a few really good bosses at AIG (along with a few that made some pretty big mistakes). Is that a baby in the bath water over there!
I see better every day on CSPAN and yet you line up to vote for (and give money to) Congress at every opportunity.
I wish there was someway to let DeSantis know he's got a friend in Hot Richard.
When I see the damage that these Wizards of the Universe have caused, I wonder whether there is justice for the millions of suffering unemployed, families who have become homeless, retirees without a livable pension, and children whose college educations are no longer possible.
Do the AIG executives stand alone in their culpability? Of course not. Until there is an investigation to root out the culprits, we should not rest, no matter how much "sweet sorrow" we have for the departure from their jobs of outrageous fortune.
He has since left the company well before AIG had to beg for $160 Billion in loans. You want to blame Mr. Liddy for this too?. Great job, because he just started 7 months ago, in time to be the begger & he was requested to take this position too.
You guys want to fire all this Execs now?. You think you can run the show. Let us get some of the clowns here with so much free time to work for $1, 10 hours away from family.
I am sure some of you might say, "Yes, I will take it, it cannot be much worst than what those chimps are doing". Oh I am sure with your McDonald's qualification, this will all work. Then 33 cents of stock value might not be so bad after all after you clowns with a Business degree (if you even have that), run AIG to the ground with no hope of recovering any of the tax payers money.
Here's what I would expect to see: foreign banks, each out a bil or two. A few US banks each out a bil or two. Many institutions, each losing a few bil, but each able to absorb that hit and move on. That's it.
Will that cause the collapse of the world? I don't think so. It will cause pain, sure, but the pain will be spread widely, and it will be borne by people who didn't ask AIG to post collateral. AIG never advertised government guarantees. They risked. Now they lose. Nowhere was it written WE should suffer that loss.
I'm not convinced letting AIG fail would hurt my neighbor, nor 3M or Shell, nor any nuts and bolts business, large or small. I've heard lots of hype, sure, but no hard facts: lists of counterparties and what they will lose. Hype is all we have.
And now, the sources of that hype are being exposed as:
(a) not having the sharpest judgment in the world
(b) not having the best information in the world
(c) not having the most honorable intentions in the world
(d) not being very honest, even when they have good information
(e) not caring about the well being of us, the ordinary citizens and voters of this country
(f) increasingly exposed as more concerned with their own interests and the interests of their pals, rather than really fixing the true problem (which they can't seem to identify anyway).
So, when those sources tell us the world will end if we simply shut AIG down right now, how can we believe that? If it's true, then show us the facts that back up that conclusion. Didn't we elect a president on the platform of transparency?