AIG is to freeze about $19m in compensation payments to Martin Sullivan, the former chief executive of the stricken insurance group, it was revealed on Wednesday night.
Andrew Cuomo, the New York attorney general, said the group, which was rescued by the US government last month, has also agreed to freeze about $600m of deferred compensation and bonuses due to executives of AIG Financial Products, whose losses precipitated the group’s collapse.
Joseph Cassano, former head of AIG Financial Products, has a share of about $69m of the $600m pool, while five others have a combined share of about $93m, Mr Cuomo said.
AIG last week agreed to help recover any improper payments made to senior management as part of an investigation by Mr Cuomo, who said that “until taxpayers are repaid with interest . . . no funds should be paid out”.
He has threatened legal action unless AIG stopped “outrageous” expenditures and helped recover past ones. The freezing of planned payments would help “stop the haemorrhaging” but the “more ambitious” goal was to recapture payments already made, said Mr Cuomo, who believes some payments could have violated a New York law.
“The American taxpayer is now supporting AIG, making the preservation of these taxpayer funds a vital obligation and a priority responsibility of your company,” Mr Cuomo wrote in a confirmation letter on Wednesday to Edward Liddy, AIG’s current chief executive.
Other firms that take government funds to shore up their finances could also be investigated, Mr Cuomo said, though he declined to name specific companies.
AIG, which now has more than $120bn in loans and liquidity lines from the New York Federal Reserve, came under widespread criticism after a congressional oversight hearing revealed that it spent more than $400,000 on a retreat for insurance agents one week after the bail-out.
AIG said in July that it had awarded Mr Sullivan a package worth at least $47m. Wednesday’s announcement affects about $19m in severance payments and bonuses.
An AIG spokesman said the moves to freeze the payments were “consistent with our discussions with the attorney general and the actions we have been taking” to reduce expenses and safeguard capital.
Lawyers for Mr Sullivan and Mr Cassano did not immediately return requests for comment on Wednesday.