AIG Executives Blow $440,000 After Getting Bailout

[ar81]

If you'd just gotten a government bailout, you might be tempted to hold a retreat at a nice California hotel -- and that's exactly what American International Group (AIG) executives did.

The committee on Oversight and Government Reform held a hearing on Tuesday at 10:00 a.m. Eastern time. to address and examine downfall of AIG, the world’s largest insurance company. The committee planned to discuss the financial excesses and regulatory mistakes that led to AIG’s government bailout.

One of the items discussed was AIG’s expenditure of $440,000 for a corporate retreat at the St. Regis Monarch Beach resort in Los Angeles, Calif. These funds were spent on Sept. 22, a week after the Federal Reserve extended an $85 billion emergency loan to AIG to keep it from going bankrupt due to insurance liabilities.


According to the receipt from the St. Regis, the eight-day company retreat was a lavish one -- $139,000 was spent on hotel rooms, while even more money -- $147,301 -- was spent on banquets. Another $23,380 was spent on undisclosed spa treatments and another $6,939 was spent on golf. A full $9,980 was spent on room service and food and cocktails at the hotel lounge.

The St. Regis Monarch Beach resort is described on its Web site as “a landmark resort of legendary proportions.”

Legendary, indeed.

See http://www.foxbusiness.com/story/markets/industries/finance/aig-executives-blow--getting-bailout/

They say it was run by a subsidiary and only two employees attended (the rest were clients or something).

Guess what.
1 retreat wasn't enough....

See http://www.bloomberg.com/apps/news?pid=20601087&sid=aVXfypExIZ9M

Oct. 8 (Bloomberg) -- American International Group Inc., castigated by the White House, Congress and Barack Obama for hosting a $440,000 conference days after an $85 billion federal bailout, plans to hold another gathering for brokers next week.

The event, at the Ritz-Carlton in California's Half Moon Bay, aims to ``motivate and educate'' about 150 independent agents who sell AIG coverage to high-end clients, said spokesman Nicholas Ashooh.

White House spokeswoman Dana Perino today called ``despicable'' expenses from the first gathering, a weeklong conference last month at the St. Regis Resort in Monarch Beach. Those costs included $23,000 for spa services, according to Representative Henry Waxman, chairman of the Oversight and Government Reform Committee.

AIG considered buying advertisements to explain its position, only to be told by public relations consultant George Sard that it would be ``a really bad idea.''

``To spend the taxpayer's money on an expensive ad campaign to apologize for how you used taxpayer money leaves you open to further attacks,'' Sard wrote in an e-mail to Ashooh. Sard, chief executive officer of New York-based Sard Verbinnen & Co., said the message was a private e-mail mistakenly sent to Bloomberg and wasn't intended to be a public statement.

With concepts like this, its starting to get very easy to see how they blew their money so fast.

 

[simonpro]

Corporate entertainment is a way of life, while the timing may be bad it's just the way things happen.

 

[JamesG]

While it didn't look good and doing it wasn't particuarly wise, $500K really isn't that much money to a company that probably spends that much money a day on copier paper.

It probably had been planned (and paid for) months before the financial markets blew up and AIG sank. In hind-sight, yeah it should have been canceled or converted into into a morale raiser for the rank-and-file employees. Like sending the "employees of the month", host an employee lottery for a charity, or some such.

 

[Urwumpe]

Corporate entertainment is a way of life, while the timing may be bad it's just the way things happen.

Yes, but we are not talking about the executive Christmas party. The timing was not just bad, it was criminal - the event must have been organized while the executive was already aware of the developing problems and was paid after the emergency loan.

But in reality, this behavior is a problem for the control organs of the company - which in that situation are the share holders in first place, I would say.

Also, 400,000 for 150 people is not really cheap and not really expensive. 139,000 for hotel rooms for 8 days makes according to Adam Riese, 115.8 $ per night. That is a typical price for an average conference hotel in Europe per night.

The manager who approved this event will sure have something to explain.

 

[ar81]

Also, 400,000 for 150 people is not really cheap and not really expensive. 139,000 for hotel rooms for 8 days makes according to Adam Riese, 115.8 $ per night. That is a typical price for an average conference hotel in Europe per night.

The manager who approved this event will sure have something to explain.

Right. This time it is not corporate money from shareholders, it is taxpayers money subsidizing golf...

 

[simonpro]

I still think you're misunderstanding how business works. You entertain clients and you entertain your resellers. That's the name of the game, it's the capitalist way.
It may not be the best, but it's the best we've got.

 

[JamesG]

You do it when you can afford it and the board members/shareholders permit it. AIG is broke and does not (or should not) have the luxury of being able to continue perks for managers and execs who have failed the corporation.

Besides that it is also a public relations black-eye as well, and since it is the public that it bailing them out, that is more important than the above.

 

[Urwumpe]

Right. This time it is not corporate money from shareholders, it is taxpayers money subsidizing golf...

Yes. It is tax payers subsidizing that 150 independent agents, who earned lot's of money for the bank, get rewarded for their efforts.

I don't know the numbers, but if I say that these 150 agents earned the bank about one hundred times the 400,000 USD in the last year, I think I am still estimating very conservative.

 

[ar81]

Yes. It is tax payers subsidizing that 150 independent agents, who earned lot's of money for the bank, get rewarded for their efforts.

I don't know the numbers, but if I say that these 150 agents earned the bank about one hundred times the 400,000 USD in the last year, I think I am still estimating very conservative.

Anyway, agents earned income for shareholders, not for taxpayers.
Taxpayers should not pay for that.

AIG seems in need to behave like a government agency. No bonuses, like a soldier who gets no awards when they come from war, but a medal.

UK is for a bailout plan if I am correct. I bet UK taxpayers would hate to subsidize that.

 

[simonpro]

You do realise it was most likely paid for more than a week in advance (at least the acocmodation and other large expenses)? Thus it wasn't directly funded from the government bailout. I also still don't think you understand the point of such endeavors, but it's probably a hiding to nothing trying to explain it. Maybe Urwumpe is braver than me

 

[ar81]

Well what we have a crisis here is a cultural shock between corporate culture and taxpayer demands.

 

[Urwumpe]

Anyway, agents earned income for shareholders, not for taxpayers.

Wrong. Agents earn income for the company. Pleasing shareholders is the job of other people. Income is important, even for a company without shareholders. No income, no profits (except your company is named Porsche, which this year made more profit than income).. No company can survive to waste money.

Taxpayers should not pay for that.

You know what a loan is? even if it is an emergency loan? The tax payers can expect to get this money back. With interest.

What would be even more expensive for the tax payer: If industry is no longer able to take loans at all. Especially in spaceflight, many projects would not even start without multi-million dollar loans for starting them.


-----Posted Added-----

Well what we have a crisis here is a cultural shock between corporate culture and taxpayer demands.

No, remove the we. It is currently mostly you, who can't understand, why in Gods name, successful and profitable employees should be rewarded.

It has nothing to do with tax payer demands, because the "tax payer" as such does not exist. Does Boeing have the same demands as John Smith? Sure not.

What they all want, is to make sure, that the taxes are used effectively and not wasted.

 

[JamesG]

AIG canceled the "meeting". I'm more annoyed that the money they did spend already on it is likely wasted.

 

[Urwumpe]

AIG canceled the "meeting". I'm more annoyed that the money they did spend already on it is likely wasted.

Well, a large part of it. But that's what you get when your PR department is not worth the money...

 

[joeybigO]

Well, a large part of it. But that's what you get when your PR department is not worth the money...

No. Very apparently that PR consultant had a very ethical descision to make. And he got the support of the US and the candidates behind him. How did he do that? Same way we used to keep within regulatory compliance. If a big wig tells you to do something so wrong as it would have liability attached all over it, they would accidentally send an email to the local press and deny the hell out of it later. What does that do? Keeps the big dogs from making really bad descions. Because when the Gov't bailed many an airline out after 9/11 then cutbacks such as food and other ammenities got lost in the cutback because of "wild" spending. Ever wonder why it costs money to check a bag? As more and more take the bait, certain taxes will be listed on your mortgage. Such as a "federal" fee not adjusted in taxes.

 

[Urwumpe]

No. Very apparently that PR consultant had a very ethical descision to make.

What I more mean is, that this money got presented as leisure spending for company officials. A good PR department could have made sure, that all know which people are rewarded that way. I don't consider the spending unethical, but badly published.

 

[Capt. Speirs]

I still think you're misunderstanding how business works. You entertain clients and you entertain your resellers. That's the name of the game, it's the capitalist way.
It may not be the best, but it's the best we've got.

Could do business like they do in Taiwan, provide clients with prostitutes and get them drunk so they sign anything.:blink:

 

[Urwumpe]

Could do business like they do in Taiwan, provide clients with prostitutes and get them drunk so they sign anything.:blink:

Yeah. Also common in some Germany companies when dealing with labor unions.

 

[simonpro]

Ever wonder why it costs money to check a bag?

It costs money to check a bag? Never encountered that, even on the airline I use in North America.

 

[fort]

Hello,

I do not know if it is the good place for this some informations and I wished neither to make a subject (too much) polemic by restarting an old topic, nor to create a new one (and in which forum? Astronomy ? ). But as here one speaks about money and that the subject (planetarium) can can be to interest some orbinautes.

fort

About the Adler planetarium .

http://cosmicvariance.com/2008/10/08/that-darn-overhead-projector/

http://cosmiclog.msnbc.msn.com/archive/2008/10/08/1518907.aspx

http://blogs.discovermagazine.com/badastronomy/2008/10/08/mccains-planetariophobia/

http://theperfectsilence.com/?p=417

http://dsc.discovery.com/space/my-take/mccain-obama-planetarium-projector.html

http://www.adlerplanetarium.org/pressroom/pr/2008_10_08_AdlerStatement_aboutdebate.pdf