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New York AG: AIG to Freeze Ex-CEO, Exec Payments

Wednesday, 22 Oct 2008 03:07 PM

Troubled insurer American International Group Inc will freeze payments to a former CEO and employees of the unit that was the main source of its financial problems, according to a letter on Wednesday from the New York attorney general.

"This is to confirm that AIG has agreed to freeze any payments pursuant to the employment package of its former Chief Executive Officer Martin Sullivan in light of the attorney general's ongoing review," according to the letter from Andrew Cuomo to CEO Edward Liddy, which was reviewed by Reuters.

The company will also freeze any distribution of funds from a $600 million deferred compensation and bonus pool for its AIG Financial Products subsidiary, which underwrote credit default swaps that triggered more than $25 billion in write-downs.

The former head of that unit, Joseph Cassano, had a share totaling about $69 million of those funds, according to the letter.

AIG nearly collapsed after troubles at the unit led to a severe cash crunch.

AIG spokesman Nicholas Ashooh said he was not able to comment on Cuomo's letter. Sullivan and Cassano, who is based in London, could not be immediately reached for comment.

AIG has been loaned in excess of $120 billion in recent weeks as it sought emergency cash to keep it out of bankruptcy.

Cuomo, on Wednesday, said AIG needed to freeze payments to former executives to rebuild taxpayers' trust.

"The American taxpayer is now supporting AIG, making the preservation of these taxpayer funds a vital obligation and a priority responsibility of your company," said the letter to Liddy.

Liddy was appointed AIG CEO late last month as part of the federal bailout.

Top U.S. lawmakers earlier in the month asked AIG to provide details of its spending of the federal loan. Around the same time, AIG said it would recover some executive payments and other compensation made to both Sullivan and Cassano.

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