American International Group is exploring several ways to repay $26 million of the $45 million in bonuses that executives at its financial products unit pledged to return last year, including a plan to cut 2010 bonuses but pay them out early, a source familiar with the matter said.
The plan being discussed is to make retention bonus payments to employees at the unit several weeks before they are due in March if they agree to have it cut by up to 15 percent, the source said Monday, speaking on condition of anonymity because these details have not been made public.
By doing so, AIG — which is obligated to pay out $195 million in retention bonuses in March to AIG Financial Products employees — would recoup the $26 million needed to cover the shortfall, the source said.
The news was earlier reported by The Wall Street Journal.
Last year, some employees of AIGFP said they would repay portions of their March 2009 bonuses after a public outcry at the size of these payments.
But a government audit from late 2009 said only $19 million of the total $45 million pledged has been collected.
"We remain committed to meeting our commitments to return a portion of the retention payments," an AIG spokeswoman said.
The current proposal is designed to meet pay czar Kenneth Feinberg's demand that the remainder of the $45 million paid out as bonuses last year be recouped, the source said.
Feinberg is the U.S. Treasury Department's special master for compensation, hired to help sort out exorbitant pay at firms that received bailout dollars.
Bad bets on toxic mortgages and credit default swap contracts made by the AIGFP unit led to the insurer's near collapse and the subsequent U.S. bailout.
AIGFP is in the process of winding down its derivatives business.
© 2017 Thomson/Reuters. All rights reserved.