View Full Version : AIG Spent $440,000 on Spa, Resort After U.S. Takeover (Update1)

10-07-2008, 04:58 PM
AIG Spent $440,000 on Spa, Resort After U.S. Takeover (Update1)

By Lorraine Woellert and Erik Holm

Oct. 7 (Bloomberg) -- American International Group Inc. spent $440,000 on a conference at a California resort less than a week after an $85 billion government takeover, lawmakers said.

The bill from the St. Regis resort in Monarch Beach included $23,380 for spa services, according to Representative Henry Waxman, chairman of the House Committee on Oversight and Government Reform. Waxman led questioning today of former AIG Chief Executive Officers Martin Sullivan and Robert Willumstad as Congress probes events that led to federal intervention.

``Average Americans are suffering economically,'' Waxman, a California Democrat, said in his opening statement. ``Yet less than one week after the taxpayers rescued AIG, company executives could be found wining and dining at one of the most exclusive resorts in the nation.''

The St. Regis, located on a bluff overlooking the Pacific Ocean midway between Los Angeles and San Diego, is ``devoted to the pursuit of service and elegance,'' according to its Web site. A ``health and wellness'' package costs $600 a night, with a two-night minimum.

The St. Regis expense ``seems very inappropriate,'' Willumstad told the committee. ``I was totally unaware that there was any plan for any conference. Had I been aware of it I would have prevented it from happening.''

Standard Practice

AIG, once the world's largest insurer, disputed Waxman's characterization of the conference. Spokesman Nicholas Ashooh said the event had been scheduled a year earlier by AIG's American General life insurance subsidiary as a way to reward independent agents who sell the company's products.

``This is very standard in the industry to reward the top 5 to 10 percent of top sellers,'' he said. ``In the insurance business, it's as basic as salary as a means to reward performance. It was not AIG executives running away to California.''

New York State Insurance Superintendent Eric Dinallo told the committee there may have been some good reasoning behind what he called ``profligate'' spending. AIG might have been taking steps to stem an exodus of employees, which would have been the ``absolute worst thing'' that could have happened to the company at the time, he said.

Invoices obtained by Waxman's committee showed that AIG spent $139,375.30 on rooms, $147,301.71 for ``banquets,'' and $1,488 at the resort's Vogue Salon, which offers manicures, pedicures and hairstyling. The group spent $6,939.09 on golf, $2,949 for gratuities, $5,016.32 at the StoneHill Tavern and $3,064.71 for in-room dining and the lobby lounge.

Presidential Suite

The group booked more than 60 rooms, including the resort's 3,100-square-foot Presidential Suite. The suite cost $1,600 a night for five nights, a discount from the standard rate of $3,200 a night, a hotel document released by the committee showed. The group also paid $1,075 in ``no-show fees.''

``Have you heard of anything more outrageous?'' said Representative Elijah Cummings, a Maryland Democrat, who was one of four Democrats on the committee who wrote today to Treasury Secretary Henry Paulson, urging him to curb excessive spending at AIG. ``They were getting their manicures, their facials, pedicures, massages while the American people were footing the bill.''

Receipts provided by Waxman were dated Sept. 22 through Sept. 30. AIG agreed to an $85 billion loan from the government on Sept. 16, ceding a 79.9 percent ownership interest to the U.S. government. Willumstad was replaced by former Allstate Corp. Chief Executive Officer Edward Liddy as a condition of the loan.

Auditor's Concern

Lawmakers also said PricewaterhouseCoopers LLP, the insurer's auditor, had raised questions about the company's transparency and complained about a lack of access to AIG's financial products unit, according to documents from a March 2008 audit committee meeting. The business sold credit-default swaps, the contracts that plummeted in value as the securities they guaranteed declined, causing more than $25 billion in AIG writedowns.

That same month, AIG's top federal regulator warned the company in a letter that the company's oversight of subsidiaries ``lacks critical elements of independence, transparency and granularity'' and contained ``a material weakness.''

The congressional committee has convened a series of hearings to examine who should be held accountable for the ``financial excesses that led to the market breakdowns,'' according to the committee's Web site.

Lawmakers yesterday lashed out at Lehman Brothers Holdings Inc. CEO Richard Fuld, peppering him for two hours with queries about excessive Wall Street pay and his failure to acknowledge the firm's financial woes until it was too late.

To contact the reporters on this story: Lorraine Woellert in Washington at [email protected]; Erik Holm in New York at [email protected]

Last Updated: October 7, 2008 16:39 EDT


10-07-2008, 06:05 PM
It seems really worse than it is.

These were the top salespeople--without your top salespeople you have way lower sales.

10-07-2008, 06:35 PM
Since they are top salespeople, they should have no problem finding suitable employment with a solvent company.

Instead, they work for a company that, but for a bailout involving taxpayer money, would have been insolvent. There would be no salaries, no commissions, and no rewards for the top performers. They should consider themselves lucky that they continue to draw their salary.

Again, if they don't like it, then they should send their resume to a firm that is solvent.

10-07-2008, 07:18 PM
It seems really worse than it is.

These were the top salespeople--without your top salespeople you have way lower sales.There are a lot of "top salesmen" beating the street. CEO's too. Sorry, they have just been devalued. I bet the resume pile is very high in the HR department hiring room.

They have to kiss the taxpayer's ass now.

10-07-2008, 07:22 PM
There are a lot of "top salesmen" beating the street. CEO's too. Sorry, they have just been devalued. I bet the resume pile is very high in the HR department hiring room.

They have to kiss the taxpayer's ass now.

I find it very unnerving when I agree with you. Did you turn into a right winger, or did I turn into a left winger? :D

10-07-2008, 07:25 PM
A crashing economy cares not for politics....

10-07-2008, 07:27 PM
I find it very unnerving when I agree with you. Did you turn into a right winger, or did I turn into a left winger? :D Its alot of fun to switch roles now and then, brings a little spice, no? ;)

10-09-2008, 12:33 AM
Almost a half a million for 60 people, unless there were 2 or more people per room. Holy smokes!

My company cut the donuts month's ago at our meetings. I'm shocked we still have coffee and toilet paper, but it's okay. I'm glad to still be working.


and... AIG needs more $$$$. ************************************************** ****************

AIG hits up Fed for more money
Three weeks after an $85 billion bailout, AIG is turning to the New York Fed for additional funding.
By Tami Luhby, CNNMoney.com senior writer
Last Updated: October 8, 2008: 6:37 PM ET
NEW YORK (CNNMoney.com) -- The New York Federal Reserve is lending up to $37.8 billion to American International Group to give the troubled insurer access to much-needed cash.

In exchange, AIG is giving the New York Fed investment-grade, fixed-income securities that it had previously lent out to other institutions for a fee. Those institutions are now returning these securities and want their money back.

The new program, announced Wednesday, is on top of the $85 billion the federal government agreed to lend to AIG last month to prevent the global company from collapsing. AIG said last Friday it had drawn down $61 billion.

The lending program is a way for AIG to get funding for its businesses, said a New York Fed spokesman. The system is similar to lending facilities the Fed provides to banks, which can also exchange collateral for cash.

The latest announcement does not jeopardize the government's ability to recoup its loan to AIG, experts said.

"AIG will repay the loan," said Stewart Johnson, portfolio manager at Philo Smith, an investment bank specializing in insurance. "It's just a matter of how much of themselves they will have to sell."

Paying back a big debt
On Sept. 16, the Federal Reserve Board agreed to lend AIG $85 billion, using the company's assets as collateral. The loan is expected to be repaid from the proceeds of the asset sales. Interest on the line of credit is steep, and the government took a 79.9% stake in the company.

Last week, AIG said it planned to hold onto its property-and-casualty insurance businesses, while selling off the rest of the company to pay the massive debt.

Those other business lines include its aircraft leasing unit; asset-management division; retirement services; and U.S. life insurance operations.

AIG chief executive Edward Liddy, who was installed by the Federal Reserve last month after the bailout, on a conference call last Friday was optimistic about the potential for the asset sales.

"We fully expect to emerge from this with a capital structure that's fit to fight," he said. "Our insurance businesses...are strong and well-capitalized."

But some analysts are more skeptical. "The current disruption in the credit markets could make it difficult to sell businesses at attractive valuations," ratings agency Standard and Poor's said.

CreditSights valued the units AIG planned to sell at $32.9 billion and the divisions it will keep at $86 billion. These figures do not include the sale of a minority stake in its foreign life insurance operations, valued at $133.1 billion.

First to hit the market will likely be units tied to airline leasing and consumer lending, both of which require funding from the debt markets, which is hard to come by these days. International Lease Finance Corp. could command more than $7 billion and American General Finance Corp. will likely bring in about $2 billion, according to CreditSights.

Once AIG sells its assets, it faces many hurdles in stabilizing its property and casualty insurance divisions, experts said.

First Published: October 8, 2008: 5:52 PM ET

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