AIG accused of 'dirty tricks' campaign

AIG, the insurance giant kept alive on a drip of US taxpayer funds, has been diverting some of its bailout money into a dirty tricks campaign against its former boss, politicians allege.

The titanic feud between AIG and Hank Greenberg, who was pushed out in an accounting scandal in 2005, has mushroomed into a major political row, with Democrats demanding to know how much the insurer is spending on public relations firms – and how much time they are spending briefing against Mr Greenberg.

The issue comes on the heels of the bonus row at AIG, when revelations that executives at the disastrous derivatives trading division had been paid $165m (£110m) in bonuses ignited public fury. "I would be extremely disappointed to learn that any of the billions of taxpayer dollars invested to support AIG may have been diverted to finance a public relations campaign against critics of the AIG bailout," Ed Towns, the chairman of the House oversight committee, wrote in a letter to AIG's chief executive, Edward Liddy.

Mr Greenberg has been a persistent critic of the way the government has run AIG since taking an 80 per cent stake to stop it collapsing last September, and has even hinted he will try to take over the company. AIG, meanwhile, is suing him to get him to return 290 million shares in the company.

The insurer now employs four of New York's top PR firms, compared with one before the bailout. Two WPP-owned firms, Burson-Marsteller, which handles firefighting on controversial issues, and Hill & Knowlton, which fields inquiries from Capitol Hill, are the subject of Mr Towns' inquiry.