Wednesday, March 25, 2009

AIG $1-million bonus exec: "I'm not guilty of anything, and I quit."

I was as angry as anyone about the A.I.G. "retention bonuses," although I also commented that Congress was acting like an out-of-control mob and pointed out that recycling bailout cash into campaign contributions should excite as much outrage as the bonuses did.

Today, Jake DeSantis, a high-level executive in A.I.G.'s Financial Products unit, from whence the economy-destroying credit default swaps came, has a op-ed in The New York Times -- actually his resignation letter to A.I.G. CEO Edward Liddy. Everyone concerned about the bonus issue owes it to themselves to read all of DeSantis's piece.

In brief, he writes that: his job at A.I.G. had nothing to do with the swaps or any other aspect of the business that imploded; his work returned handsome profits; the people responsible for the offending swaps are long gone from the company; he and others in the Financial Products unit agreed a year ago in exchange for the contracted bonus payments to stay on and work long hours to help rescue company's remaining assets, in part, so A.I.G. could pay back the taxpayers; he personally was asked to stay and work for a salary of a dollar a year, with the prospect of the big bonus as his compensation; the company and Liddy assured DeSantis and his colleagues on numerous occasions that the company would honor its commitments to them and stand behind them.

Despite all that, Congress, the media and two state attorneys general bellowed and threatened, Liddy caved, and everyone wants DeSantis to return the money or pay the penalty of "exposure" in a heated atmosphere. DeSantis is resigning instead, seeing no further reason to keep working 14-hour days. He's pledging to pay the after-tax portion of his bonus -- whatever that works out to be after Congress is through -- to charities that help people hurt by the economic downturn.

Assuming what he says is true, the guy makes a good case for himself, and I don't blame him for quitting. I still believe there should not have been any room for bonuses in a company that has swallowed $170 billion of our money to avert bankruptcy. On the other hand, this should have been made clear long ago and more appropriate forms and levels of compensation worked out. Stringing people like DeSantis along so he works for a year and then gets smacked by the government is simply wrong.

What do you think? Post a comment.


  1. Who did he vote for ?

    How much did he contribute to Dodd, Frank ?

    Sorry buddy, you still got the job

  2. I was waiting for something like this. Since the AIG managers have become the latest political whipping boys, so it was only a matter of time before someone struck back. I can't say it absolves him entirely (the piece has too much "I earned this money" kind of wording), but in general I agree with you that he makes a pretty good case for himself. His strongest points were that he was not involved in the shady dealings (a point that has been taken for granted by the media and politicians with no facts to back it up), and he makes a good argument for why contracts should be honored (he and other managers probably would have quit a long time ago otherwise, leaving AIG in even worse shape).

    Another thing I didn't get: If it's true that the managers agreed to work for $1 a year, doesn't that make them exempt from the bonus tax, since it only applies to those making over $250,000? I'm not sure that's very relevant to the topic, but it is interesting that the very people that the bonus tax was meant to punish may actually not get punished. Of course, I don't think that matters much to the politicians who were just trying to score politican points.

  3. Can we really believe what DeSantis says is true? The general public has been misled and lied to repeatedly in matters of high finance.
    Even after reading his resignation letter, I still have no sympathy for the AIG pirates.