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SINGAPORE: AIG has clarified a report about the company spending more than US$440,000 on an "executive getaway" at a California beach resort just days after the insurance giant was rescued by an US$85b US government loan.
"The conference (at St Regis Hotel from September 24-28) was held for leading independent distributors with AIG American General and was not an 'executive retreat'," said an AIG statement.
"Conferences like this provide an opportunity for top independent distributors to meet with selected members of insurance company management to learn about ongoing developments in the company and to provide them with product, marketing and operational updates. Given AIG's current situation, this conference was even more essential to maintaining critical relationships with distributors and the policyholders they represent.
"The vast majority of the attendees at the conference were independent business people and their guests, not AIG employees. In fact, out of over 100 attendees, there were only 10 AIG American General employees who were there to represent the company and participate in the meetings and discussions. The contract for the conference was arranged in 2007 and the commitment to our distributors was made at that time.
"AIG American General has built its business and reputation by keeping commitments - to customers, employees and distributors. It takes its commitments seriously. AIG American General made a commitment to some key distributors well in advance of the current crisis and despite the current situation and heightened media attention, believed it was important to honour that commitment."
The statement came after US Democratic Congressman Henry Waxman's remarks before the House Committee on Oversight and Government Reform.
"Less than one week after the taxpayers rescued AIG, company executives could be found wining and dining at one of the most exclusive resorts in the nation," Waxman said.
The US Federal Reserve stepped in to save American International Group from imminent collapse on September 16, with a loan that gave the US government a stake of 79.9 per cent in the insurance behemoth in the deal.
"Less than one week later, AIG held a week-long retreat for company executives at the exclusive St. Regis resort in Monarch Beach, California," Waxman said.
Invoices showed that AIG paid the Pacific Ocean getaway resort more than US$440,000, Waxman told the committee on its second day of hearings on the Wall Street economic crisis.
The charges included close to US$200,000 for rooms - which cost between 425 and 1,200 dollars per night - over US$150,000 for meals and USS$23,000 in spa charges, he said.
"Well, average Americans are suffering economically. They're losing their jobs, their homes and their health insurance," Waxman said, "We'll ask whether any of this makes sense."
Without the government loan, analysts had argued that an AIG collapse, fuelled by problems with complex derivatives known as credit default swaps, could trigger a wave of failures in the global financial system and deepen the credit crunch.
"AIG spent - listen to this one - 23,000 dollars at the hotel spa and another 1,400 dollars at the salon," said Democratic Congressman Elijah Cummings of Maryland.
"They were getting their manicures, their facials, their pedicures and their massages while the American people were footing the bill."
Cummings pointed out that AIG spend 7,000 dollars in green fees at the golf course and 10,000 dollars on bar tabs as he turned his questions on former AIG chief executive officers Robert Willumstad and Martin Sullivan.
"I do find it interesting that Mr Willumstad knows nothing about it, but this came just a week after - after you left. Did you know that, Mr Willumstad?" Cummings asked.
Willumstad answered: "I heard you say that, but I was totally unaware that there was any plan for any conference."
"And, Mr Sullivan, I'm curious, what were your views on this?" Cummings asked.
"You know, obviously, I left the company many months earlier prior to Mr Willumstad. But if I'd have seen bills like that, I can assure you, as the CEO, I would have been asking questions," Sullivan said.
Waxman noted that longtime former CEO of AIG, Maurice "Hank" Greenberg, "told the committee he is too ill to appear today to answer questions".
"Mr Greenberg blames Mr Sullivan and Mr Willumstad for the downfall of AIG," Waxman noted. "Many others think it is Mr Greenberg who sowed the seeds that led to AIG's failure."
In AIG's defence, New York State Insurance Department Superintendent Eric Dinallo told the committee that AIG may have been trying to stave off a mass exodus of top talent from the company.
"So if there was a thinking that they needed to bring everybody together in order to keep the productivity of the insurance companies intact and protect policyholders by keeping them from going into a runoff status," said Eric Dinallo.
"I do agree that there is some profligate spending there, but the concept of bringing all the major employees together... to ensure that the 85 billion could be as greatly as possible paid back would not have been a crazy corporate decision."
Cummings later told CNN that revelations of the resort spree "upset my constituents, many of whom are losing their houses and losing money in the 401(k)s (retirement savings plans). They are upset and rightfully so."
- AFP/CNA/ir
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