Former A.I.G. Employees Might Sue Over Payouts

New York Times - Andrew Ross Sorkin
March 16, 2010

Several former American International Group employees might sue the insurer after it gave them less retention bonus money than they should have received, Reuters reported, citing lawyers for the employees.

As The New York Times reported Monday, A.I.G. is planning to hold back $21 million in retention bonuses for employees of its Financial Products unit in the hope that the move will put to rest a controversy that has plagued the insurer since its government rescue in the fall of 2008.

The insurer is asking former employees who are eligible for the payout what they earned after leaving A.I.G. so it can reduce the retention bonus payments by that amount, Gary Phelan, a partner at law firm Outten & Golden, which represents eight current and former employees, told Reuters.

They’ve had several months to determine whether or not any payment should be offset, ” Mr. Phelan told Reuters. Unless there’s a very quick payment made of the balance 25 percent, I think (a lawsuit) is inevitable. ”

The bonuses in question were contractually granted early in 2008, months before the bailout, and were scheduled to be paid over two years. The original goal of the bonus program was to retain employees. But after the taxpayers came to A.I.G.’s rescue, the scheduled bonus payments seemed politically unthinkable  as they covered people at the financial products unit, which dealt in the derivatives at the heart of A.I.G.’s near-collapse.

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Most of the people still owed money have taken other jobs because the financial products unit is being wound down. A.I.G. sent them questionnaires asking about their outside income, and it believes it can use their responses to pay smaller bonuses without violating the contract.

Bonus recipients have voluntarily repaid about $19 million as of late 2009. A.I.G. recovered $20 million last month, when it offered to pay recipients early if they would accept less.