AIG, Party On!

Oct 9th, 2008
Chicago Tribune

USA - Here's the tab: $139,375.30 for rooms. $147, 301.71 for 'banquets.' $1,488 for the Vogue Salon, which features manicures, pedicures and hairstyling. $6,939.09 on golf. $2,949 for tips. $5,016.32 at the Stonehill Tavern. $3,064.71 for in-room dining and the lobby lounge. That's part of the $440,000 bill from a recent weekend bash that an American International Group Inc. subsidiary threw for its top performers at the posh St. Regis resort, on a bluff overlooking the Pacific Ocean. Sounds like they had fun.

Their timing was exquisite. The AIG folks and their guests hit the spa just days after the insurance behemoth grabbed an $85 billion bailout package from U.S. taxpayers. They needed it because AIG piled up net losses of $18.5 billion in the past three quarters on write-downs tied to the collapse of the U.S. subprime mortgage market.

Wheeee! Party on!

Some of the attendees lolled in the 3,100-square-foot presidential suite ($1,600 a night) while the company started to draw down thetaxpayers'billions. The company has already used at least $61 billion of the $85 billion loan, and the Federal Reserve announced Wednesday that it has engineered even more help for the company.

Former AIG CEO Robert Willumstad, who has rightly lost his job, said at House committee hearing on Tuesday that he didn't know about the conference and would have 'prevented it.' The company scrambled on Wednesday to explain why all this was on the up and up.

AIG has a new CEO, Edward Liddy, who had a good run as boss of Northbrook-based Allstate Corp. Let's hope Liddy clears out anybody left at AIG who was involved in the St. Regis splurge and other nonsense at the company.

It was disclosed at the hearing this week that AIG executives hid from auditors the full range of the company's risk-laden financial products as losses mounted. Those who wanted to blow the whistle were thwarted: A former AIG auditor said he resigned after being shunted aside when he tried to speak up about how the firm estimated its liabilities.

Meanwhile, former CEO Martin J. Sullivan, who ran the company for three years while it was taking on water, reportedly has received a $5 million performancebonus.

Americans are angry at the corporate chiefs who sank their companies, all the while reassuring investors that everything will be just fine, and then floated to earth under golden parachutes. Executives such as Liddy who are sent in to mop up the mess have a huge job ahead. They have to save companies that have been destroyed by bad decisions of government officials and business execs. They have to protect taxpayers, who have been asked to bail out these firms.

They also have another job: Restore public trust. Pay for real performance, not accounting legerdemain.

And cancel the spa reservations. A conference call will do.