New York State Attorney General Andrew Cuomo is at it again, this time promo gating against American International Group. It's not that AIG doesn't deserve full scale hard nose investigation of its executive compensation abuse, it's just that Andrew Cuomo has no intention of doing it. Despite what we wish were true, that Cuomo who calls himself the People's Lawyer would do the people's bidding against the greed ridden amoral executives of AIG, the history is that he's just grandstanding. In the end will back off make a deal and accept the plea which serves no useful purpose, but do it under much hyped up fanfare.
With the heat on, the big banks sat down with Mr. Cuomo to discuss his political ambitions and whether or not they would push back Spitzer style or behave more “amicably” like Thain. That’s where a deal was made in everybody’s best interests and what began as an aggressive investigation effective and punitive has morphed into a protect-the-big-banks sham.New York State Attorney General's office seems to be a great springboard for politically ambitious self aggrandizing lawyers with eyes beyond the New York state governor's mansion; the key is do you know when to let off of the accelerator? That was a lesson Eliot Spitzer learned the hard way!
This should be interesting spectator sport, but I don't have great expectations that anything meaningful will come of it.
Here it is the from the New York rag it self.
Cuomo Seeks Recovery of Bonuses at AIG
New York’s attorney general demanded on Wednesday that the American International Group recover bonuses and other payments from its former executives, lest he take formal action against the insurer.
Recently bailed out by the federal government, A.I.G. is afloat only because of billions of dollars in government loans. With more and more taxpayer money committed, Congress and others have expressed outrage over high pay in general at financial firms and in particular at some of the perks that have come to light at A.I.G.
The attorney general, Andrew M. Cuomo, made his demand in a letter to A.I.G.’s board, citing “unwarranted and outrageous expenditures” by the company as contrary to New York law. The letter, which described a lavish golf outing and an overseas hunting trip that cost nearly $100,000, follows other recent disclosures of excess by corporate America.
The threat against A.I.G., which Mr. Cuomo announced at a news conference on the street just a block away from the New York Stock Exchange and his office, seeks to recover multimillion-dollar payments to Martin Sullivan, A.I.G.’s former chief executive, and Joseph J. Cassano, who ran the unit blamed for the losses that pushed the company to the brink of collapse.
“A.I.G.’s belief is that they had the party, and the taxpayers will have the hangover,” Mr. Cuomo said, addressing a sidewalk throng of reporters, camera crews and tourists. He added that his office could bring civil charges if A.I.G. did not work to recover big bonuses paid to executives.
His actions are reminiscent of the sweeping attacks on Wall Street by Eliot Spitzer, who was the attorney general before his brief term as governor, which ended in scandal.
Public anger has grown the last few weeks over executive compensation. Lawmakers in Washington last week criticized the $442,000 that an A.I.G. subsidiary spent on a weeklong resort retreat for top sales staff, within days of receiving government aid. The Treasury Department, in the midst of engineering a multibillion-dollar bailout of the financial industry, has announced that it will limit compensation to top executives whose companies took advantage of federal aid.
“People are outraged that these large businesses have shafted the shareholders, that’s why were seeing this,” said Kenneth N. Klee, a law professor at the University of California, Los Angeles. “And rightly so.”
In his letter, Mr. Cuomo pointed to payments made even as A.I.G.’s losses were mounting.
“The board awarded its chief executive officer a cash bonus of over $5 million and a golden parachute worth $15 million,” Mr. Cuomo wrote. “Similarly, in February 2008, a top-ranking executive who was largely responsible for A.I.G.’s collapse was terminated, but still permitted by the board to keep $34 million in bonuses. This same individual apparently continued to receive $1 million a month from the company until recently.”
Mr. Cuomo was apparently referring to Mr. Sullivan, the former chief executive at A.I.G., and to Mr. Cassano, who ran A.I.G. Financial Products, the company unit that was heavily involved in the complex financial transactions that led to billions of dollars in losses.
An A.I.G. spokesman, Nick Ashooh, said the company had received Mr. Cuomo’s letter and “will of course fully cooperate with the attorney general’s office, and it will get the immediate attention of the board.”
Two weeks ago, long before Mr. Cuomo’s letter was sent, the company began reviewing all expenses and activities, Mr. Ashooh added.
Lawyers for Mr. Sullivan, who was ousted in June, and Mr. Cassano, who resigned in February, did not return calls on Wednesday. In his letter, Mr. Cuomo went on to cite golf and hunting trips that executives at A.I.G. took after the government extended an $85 billion line of credit to the insurance company, which has since obtained additional financing from the Federal Reserve Bank of New York.
A handful of A.I.G. officials flew to England on a private jet for a partridge hunt that reportedly cost about $90,000. The use of the plane cost about $17,000, according to a person familiar with Mr. Cuomo’s investigation.
Mr. Cuomo’s demand rests on a provision of New York law that allows creditors to challenge any payment by a company if the company did not get adequate value in exchange. In this case, the argument would be that the executives took millions of dollars in compensation and severance but did not provide service worth the money.
“Obviously, it’s a question of proof,” said Jim Cohen, a law professor at Fordham University. Lawyers for the attorney general, in the name of creditors of A.I.G. — say, the people of New York to whom the company may owe taxes — would try to convince a judge of how little executives’ services were worth.
“It’s a difficult situation, because you’re going to have to get into what the market was,” Professor Klee said. He added that if Mr. Cuomo’s tactic worked, creditors might try to use it in other contexts to pursue highly paid executives, like those who worked at Lehman Brothers, now in bankruptcy proceedings.
“It’s not going to be easy litigation,” he said, “but it certainly could be brought.”
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