(Bloomberg) -- An ex-chief executive officer of AIG’s Financial Products unit repeatedly told a U.K court that political and media pressure didn’t influence the company’s decision to “wipe out” a $600 million employee bonus pool during the financial crisis.
“We had pressure from all different places, it doesn’t mean we agreed with the pressure,” William Dooley, who was head of AIGFP between March 2008 and December 2015, told the court Thursday. “It’s not the case that we caved. I’m not suggesting that any of this pressure had any effect on our decision not to pay.”
Dooley was testifying in the case of 23 former Banque AIG and AIGFP executives fighting American International Group Inc. for $100 million in bonuses that were set aside under a deferred-compensation program and retention plans. The plans provided for “a sharing of the risks and rewards” of AIG’s financial products business, according to court filings. This meant that if AIGFP sustained a loss, compensation accounts would be hurt.
In 2007 and 2008, AIGFP struggled with liquidity. The Federal Reserve loaned $85 billion to AIG, and in a letter to incoming CEO Edward Liddy, then-New York Attorney General Andrew Cuomo said that the company had agreed “no funds will be distributed” out of AIGFP’s bonus pools on the basis that “these pools should not be used to reward executives ahead of taxpayers.”
In a lively exchange, Dooley deflected suggestions from a lawyer for the former staff, Daniel Oudkerk, that it was Cuomo’s intervention that provoked AIG to impose negative balances on staff bonus accounts and never restore the sums.
‘Hell or High Water’
“AIG was not going to permit payment come hell or high water because that’s what it agreed with the attorney general,” Oudkerk said. Later on, the lawyer emphasized that, in his 2008 letter, Cuomo confirmed with AIG that the bonus plans would have negative balances.
“It’s pretty clear who had their hands on the steering wheel,” Oudkerk said.
Dooley maintained that the decision to impose negative balances was a result of AIGFP’s massive losses and permitted under the terms of the plans.
“I do not believe pressure from Cuomo had anything to do with wiping out bonuses,” Dooley told the court.
The press office for Andrew Cuomo didn’t immediately respond to an email request for comment and couldn’t be reached by phone outside of business hours. Spokeswomen for AIG and Stephenson Harwood, the law firm representing the claimants, declined to comment on the case.
The former CEO confirmed that there was considerable public outrage directed toward the company at the time. Dooley said he’d received a death threat amid rising public anger following the government bailout of the insurer.
“The politicians weren’t interested in protecting me,” he told Judge Andrew Baker.
During his questioning of Dooley, Oudkerk also argued that it was parent AIG Inc., rather than AIGFP itself, that controlled decisions about the employee bonus pools following the September 2008 bailout.
The court was shown a document detailing the chronology of AIG’s contact with the Fed regarding retention plans. In late September 2008, Oudkerk said members of AIG had two meetings with the Fed about AIGFP within four days. Furthermore, throughout the chronology document, Dooley is referred to by as senior vice president, his then-title at AIG Inc.
Asked why he didn’t use his Financial Products title, Dooley replied, “I always tried to wear both hats at the same time... I wore multiple hats.”
Oudkerk presented an October 2008 letter from Dooley to AIGFP employees informing them of the potential negative balances to come. He pointed out that the letter was written on AIG Inc. headed paper. Dooley denied this meant AIG Inc. was completely in charge.
“I really only had one letter head,” Dooley said. “I would always use the only stationery I had.”
The case is Tobias Gruber & Ors v. AIG Management France, SA & Anr, High Court of Justice, Queen’s Bench Division, case no. CL-2014-000921.
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