Attorney General tells AIG: 'The party's over'
Thursday 16 October 2008
The New York Attorney General, Andrew Cuomo, has launched a legal broadside against AIG, saying that the nationalised insurance giant has squandered money on luxury breaks for executives, including an overseas hunting trip and golf sessions.
He has sent a cease-and-desist letter to the company, declaring that "the party's over" and saying he believed that $54m (£31.4m) in bonuses and "golden parachute" payments to ousted executives had violated state law.
The legal assault puts new heat on AIG, which was effectively nationalised by the federal government last month, after hundreds of billions of dollars of unregulated bets in the derivatives markets took it to the brink of bankruptcy.
The company exists now only thanks to $123bn of bridging loans from the government, while it tries to sell off its profitable traditional insurance businesses.
AIG is fast becoming one of the most potent symbols of the excesses of unregulated Wall Street, and its former executives are facing mounting legal scrutiny. The Securities and Exchange Commission and the FBI are investigating whether they told the truth to investors as losses at the derivatives business spiralled out of control.
Shortly after its bailout, it was revealed AIG's top sales people were treated to $23,000 of spa treatments and $7,000 of golf outings at a $440,000 getaway in the swanky California retreat of St Regis Resort, Monarch Beach. Last week it cancelled a similar event at the $400-a-night hotel.
Mr Cuomo wrote to management yesterday saying pre-nationalisation spending may have violated New York law, if it is ruled "unwarranted and outrageous".
AIG replied it would cooperate with the investigation, and added that it had issued orders to end all activities that weren't essential to the conduct of its business.
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