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Surprise: AIG Bonuses More Than First Reported


Insurance giant neglected to mention $454 million in compensation.

Do words have meaning?

In March, American International Group (AIG) said it paid approximately $120 million in bonuses to about 6000 workers. The company now says it paid close to $454 million -278.3% more than it initially disclosed.

But AIG tells Politico, a website covering Washington, that it responded accurately to the questions as asked.

A pettifogger's delight? Or sloppy reporting?

Nick Ashooh, AIG spokesman, says the $454 million total "reflects all types of variable compensation across all our businesses." The $120 million figure included only bonuses paid to top executives at corporate headquarters and others in its major businesses around the world. He says the higher total includes the previously disclosed $120 million.

"I think we've been pretty forthcoming," Ashooh told Politico. "AIG is not a simple organization. We're answering the questions that we think we're being asked."

Is "think" the weasel word here?

In March, Politico asked AIG via e-mail, "What was AIG's total bonus pool (outside the retention agreements) for 2008?" AIG responded: $120 million.

Or is AIG playing it straight because Politico's question didn't request details on "all types of variable compensation"?

Later that month, Congressman Elijah Cummings sent written questions to AIG, including, "Please specify the exact amount in bonuses -- not retention payments or any other form of compensation -- paid by AIG to employees of any division of AIG in 2008 or paid in 2009 for work performed in 2008."

The response: $454 million.

Politico, unlike Cummings, didn't ask for totals for 2008, including bonuses paid this year for work performed last year or for details on "any division."

AIG can make that argument with a straight face, but it should understand by now that Washington politics aren't conducted according to Generally Accepted Accounting Principles, and broad questions shouldn't be answered narrowly.

AIG will get hammered -- again -- over its bonus payments, and is stupidly playing into the hands of politicians who seek to regulate every aspect of Wall Street.

If you're sick of this, you're not alone. But here's why the shenanigans are important:

"(AIG's) collapse would be close to an extinction-level event as the financial markets have seen since the Great Depression," money manager Michael Lewitt wrote last September in he New York Times. "AIG does business with virtually every financial institution in the world…"

Maybe the folks at Politico are just learning that most of Wall Street's inhabitants are much smarter than the average Congressman (or reporter) and, given the chance, will sometimes mislead the uninitiated by responding narrowly to a poorly worded question.

We'll see, because AIG says it's developing a new bonuses plan for this year after meeting with representatives of the Federal Reserve and the US Treasury.
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