Misery Index

Less than a week after the Fed's committed $85 billion to bail out AIG, the executives of AIG insurance company headed for a week-long retreat at a resort and span, the St. Regis Resort in Monarch Beach, California.  This was revealed today by Congressional investigators.  "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," Waxmay told the House Committee on Oversight and Government Reform.

The AIG group occupied more than 60 rooms.  AIG documents obtained by Waxman's investigators show the company paid more than $440,000 for the retreat, including $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 spend $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.

The group booked the restort's 3,100-square-foot Presidential Suite for $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.  It also paid $1,075 in "no-show fees." 

A more detailed listed can he found on the Oversight House HERE. (PDF)

"Have you heard of anything more outrageous?" said Rep. Elijah Cummings (D-MD), who plans to seek an investigation of the spending.  "On the 22nd of September to the 30th, they spent almost 400,000-something at a resort having manicures and playing golf," said Congressman Elijah Cummings (D-MD).  "They're getting their pedicures and their manicures and the American people are paying for that," he added.  ""hey spent $25,000 on 'leisure dining.' I don't know what that is," Cummings questioned.  Rep. Jackie Speier (D-CA) answered his question with, "That's bars."

"It is very upsetting, because the American people are giving and say for example gave AIG some 85 billion dollars - 85 billion to bail them out," Cummings told CNN.  "That is the kind of thing that upset my constituents, many of whom are losing their houses and losing money in the 401(k)s," he said.  "They are upset and rightfully so."

"Rooms at this resort can cost over $1,000 a night," Congressman Henry Waxman (D-CA) said this morning as his committee continued its investigation of Wall Street and its CEOs.  "Well, average Americans are suffering economically.  They're losing their jobs, their homes and their health insurance," Waxman said.  "We'll as whether any of this makes sense."

"This is unbridled greed," said Congress Mark Souder (R-IN), "it's an insensitivity to how people are spending our dollars."

Congressman Waxman also said there is evidence that former CEO and Chairman of the Board Willumstad and former AIG CEO Sullivan changed the bonus schedules once the company began to post losses, so that executives under the "Senior Partners Plan" would continue to make multi-million dollar salaries.  Sullivan testified that the company's bonus plan was amended to exclude unrealized losses, in effect protecting executive bonuses from millions of dollars in losses. 

WHAT DO THE EXECS HAVE TO SAY ABOUT AIG FAILING?

So what do Willumstad and Sullivan have to say for themselves?  The ex-CEOs themselves blamed accounting rules and market conditions for the problems that led to the crisis stating the accounting rules forced AIG to take tens of billions of dollars in losses stemming from exposure to toxic mortgage-related securities.  In testimony for the committee hearing, ex-CEOs Willumstad and Sullivan said the rules forced AIG to take billions in writedowns and led to a downward spiral that led to the government action. 

Waxman however, put the blame on AIG's troubles squarely on its past and present leaders.  "In each case, the companies and their executives grew rich by taking an excessive risk," said Waxman.  "In each case, the companies collapsed when these risks turned bad.  And in each case, their executives are walking away with millions of dollars while taxpayers are stuck with billions of dollars in costs."

In particular, Waxman singled out AIG's financial products division, headed by Joseph Cassano.  "This (bailout) was a direct result of the mistakes made by Mr. Cassano," Waxman said, blaming him for putting AIG in a situation where it had a $60 billion debt without the money to pay it.  "Yet even today, he remains on the company payroll, receiving $1 million a month."

"Mr. Sullivan and the other top executives should have had their bonuses slashed due to poor performance," Waxman said.  Sullivan said it was "substantially reduced" by the board in 2007 due to poor performance.  Sullivan was given a $15 million "golden parachute" payment after being replaced as CEO in June.

AS FOR THE RETREAT?

When questioned about the retreat, Willumstad  replied that he was unaware of the retreat and that it "seems very inappropriate."  Of note, Willumstad had refused his $22 million in severance pay.  In a letter, Willumstad said he did not have the time to launch his restructuring plan and that he preferred "not to receive severance payments while shareholders and employees have lost considerable value in their AIG shares."

Sullivan replied that he was not leading the company at the time, adding, "If I had seen bills like that, if I was CEO, I can assure you I would have been asking questions."

But AIG spokesman Nick Ashooh said that the St. Regis retreat had been "completely mischaracterized." He said it was an event to reward top-performing sales agents, and it was not for executives.  "This is very standard in the industry to reward the top 5 to 10 percent of top sellers," he said.  "In the insurance industry, it's as basic as salary as a means to reward independent agents who sell the company's products."  "They're playing it as AIG executives running off to California while all this was going on," said Ashooh, adding that the event was scheduled a year ago.  "It wasn't AIG executives running off for a lavish weekend."

TIMELINE OF CEOs FOR AIG

Maurice "Hank" Greenberg, 1970 - 2005
Martin Sullivan, 2005 -  June,  2008
Robert Willumstad - June, 2008 - September, 2008

INFORMATION SOURCES

• ABC News
• AFP
• CNN Money
• CNN Money
• CNN Money
• Forbes
• MSNBC
• AZ Central
• The Hill

PICTURE SOURCE

• New York Times