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Yet another AIG subsidiary parties hearty days after bailout
October 9th, 2008, 4:00 am · 38 Comments · posted by Teri Sforza, Register staff writer
Deja vu?
On Sept. 20 - four days after the federal government’s $85 billion bailout of American International Group Inc. - subsidiary International Lease Finance Corp. was flying high, celebrating its 35th anniversary with a huge party at the Smithsonian National Air and Space Museum outside Washington, D.C.
Los Angeles-based ILFC, AIG’s profitable aircraft-leasing unit, hosted 820 guests at the museum’s Udvar-Hazy Center (named for ILFC exec Steven Ferencz Udvar-Házy, whose $65 million donation was the Smithsonian’s largest ever and made the new museum possible).
Apparently, the Waxman Committee on Oversight and Government Reform has yet to get wind of this particular extravaganza and order up receipts (as it did for an AIG subsidiary’s $443,344 bash at the St. Regis Monarch Beach that same weekend), so The Watchdog is unable to furnish total figures for the weekend’s (clearly monumental)cost.
But ILFC paid the Smithsonian $27,103 just for janitorial and security services, spokeswoman Claire Brown said.
The cost for catering, food and drink for 820 people?
Plus the cost of one or two nights of hotel stay and transportation to and from the airport for those 820 people?
Perhaps the Waxman folks will subpoena the details.
- Meantime, the feds agreed yesterday to loan AIG another $37.8 billion.
- And all systems are go for another posh retreat next week for the insurace subsidiary’s salesfolks at the Ritz Carlton in Half Moon Bay. Update: Mounting pressure lead AIG-AG to cancel next week’s Half Moon Bay event for its independent agents.
- And some 400 stockbrokers who handle products from AIG’s subsidiary FSC Securities Corp. (and their families) will gather at Atlanta’s Marriott Marquis hotel next week for another conference. FSC will cough up airfare, rooms, food and refreshments.
It is important to understand that ILFC - like AIG American General, the insurance subsidiary that threw the $443,344 bash at the St. Regis shortly after the bailout and will have the Half Moon Bay event next week - is a profitable subsidiary of ailing parent AIG. ILFC leases more than 1,000 jetliners to airlines worldwide, and is worth some $55 billion, reports say.
The argument made on behalf of these profitable subsidiaries goes something like this: Events like these 
reward workers and customers, and raise morale and the company’s profile. Why shouldn’t a successful subsidiary do as it pleases?
The argument on the other side goes something like this: If a subsidiary is doing well enough to spend that kind of money on that kind of event, why does the government have to bail out the parent?
The Watchdog invited comment from both ILFC and parent AIG. Nick Ashooh, spokesman for parent AIG, explained things this way:
“The assets of the subsidiaries? In most cases, the subsidiaries are regulated, required to maintain dedicated reserves to make sure we can pay customer claims. That’s why we can’t just reach down and take money away from them,” he said.
“What we’re dealing with is a liquidity problem at the parent level. The biggest problems are our financial products business. More specifically, credit default swaps.
“But the insurance business (AIG-AG) and IFLC are doing well. They continue to do business, and they’re doing what they need to be doing to maintain relationships and promote business. There are meetings going on all over the world. We have to be able to meet with the people who sell our products. Ask any other insurance business. They all do it. They have to. You have to meet with your agents, clients and customers.
“With that said, everyone recognizes the gravity of our situation and the need to be circumspect even about things that in the past were routine. That lesson is not lost - but at same time, it’s really important for us, especially to be able to pay back the federal loan, to maintain the health of our businesses, and to meet with clients and brokers.”
An angry reader has suggested going to Half Moon Bay next weekend with picket signs nonetheless. I wonder if he was kidding.
(Check out IFLC’s party invitation here.)
More Watchdog:
- AIG subsidiary parties in style in OC, two weeks after bailout
- AIG’s St. Regis blowout bill: $443,344
- Obama on AIG’s $400,000 party: ‘Fire the scoundrels!’
- Prez didn’t push for bailout so execs could get facials
- Behind the AIG party: A look at the St. Regis
38 Comments
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I only hope that my fellow citizens feel as much outrage as was needed during the American and French revolutions. Because part of me thinks that is all that will put a halt to this CR A P!!!!
If they are profitable subsidiaries, let them bail out their own parent company. WHERE IN THE HELL IS THE COMMON SENSE??????
And some people want government run health care? Look at how inept government is, taking billions of taxpayer money to bailout companies, but still provide no oversight while these companies go out and party on the taxpayer dime. The whole reason this crisis exists is because some in government where too busy getting paid off by Fanny and Freddie so they turned a blind eye to the problems brewing. These problems could have been adverted back in 2003 with regulation proposed by the President.
NY Times Sept 11, 2003 http://query.nytimes.com/gst/fullpage.html?res=9E06E3D6123BF932A2575AC0A9659C8B63&sec=&spon=&pagewanted=print
http://www.youtube.com/watch?v=usvG-s_Ssb0
I can believe that AIG used $443.343,71 from the fed money for an expensive seminar in the St Regis in monarch beach CA. This is just a shame; and they still want an extra $ 37.8 billion on the top of the $85 billions already received. Maybe for theit half moon week end!I hope no one will have the audacity to say that almost half million is nothing compare to billion when million of Americans see coming a black, poor Christmas!
Need to former a division of my self that is not responsible for myself.
Think the tax people would buy that crap?
There should be a no parties, no bonus’s,and no raise for any companies that take bailout money.
This country is quickly becoming overrun by the main stream media, the ignorant, and the angry.
These parties go on at many top insurance companies to attract the best talent because this is a sales business first. If you don’t offer bonuses like these, the talent moves to the company that pays them better.
The way the ignorant media and politicians report this stuff, you would assume that AIG took the bailout money and THEN decided to throw a huge party. These retreats and parties are rewards for some of the hardest working employees you would know.
So stop getting angry and start using your minds, people.
Maybe people can relate to this. What would happen if you told your Ford dealer that because Ford is having trouble you would have to give them an less competitive commission for selling cars? The most in demand sales people would obviously go work next door at the Honda dealer that gives them an extra bonus incentive that Ford would have cut. Ford would then be left with only the least experienced and less talented sales people and the company would go even further in debt.
More AIG Info…
The New CEO of WaMu said,
Yes I only worked 16 days but I am fully entitled to $18 million
I have news for this foul bag of cow droppings
I could retire off two years interest to your $18 million
Rotten S O B
You tax dollars at work. We like to fund excessess in our bailouts.
Thanks to our elected morons that did not put the proper safeguards in place prior to throwing money at them.
Our kid’s kids will be paying for their partying.
Yes, I am outraged. We get the message. What can we do as private citizens right here and right now? I’m serious - don’t mock the questions - help me out.
Not Even -
You could:
1. contact your Rep and Senator in Congress and let them know how you feel (http://www.visi.com/juan/congress/ to figure out who they are, and contact info) ;
2. contact the Waxman Committee and ask them to do more investigating (http://oversight.house.gov/contact/)
3. Contact AIG directly and demand accountability (http://www.aigcorporate.com/corpsite/contact.html)
okay, so get rid of the parent as it appears they are the anchor. Let the “little” if well run AIG subs operate independant. No bailout for the parent.
People are so quick to get angry. How long would it take to plan a party of this scale with 800+ people? This party would have been in the planning stages way before any bailout money was even a possibility. Profitable subsidiaries are supposed to cancel anything that looks like fun because their parent company is doing poorly?
ever wonder if the CEO of AIG is buddy of Polson?!!!!! Does everybody these days feel POWERLESS to do anything, or is it just me? Even after hundreds of thousands or even millions wrong to our Congressman, the $700 billons bailout still passed. So what does this tell you guys? Never in my life i have felt so betrayed by my government!!!!
I saw this article right next to another entitled “More Than Ever People Seeking Aid For Food & Shelter”. Where are these executives’ sense of decency?
This response from AIG’s PR Department is untrue.
“The assets of the subsidiaries? In most cases, the subsidiaries are
regulated, required to maintain dedicated reserves to make sure we can pay customer claims. That’s why we can’t just reach down and take money away from them,” he said.
UNTRUE!
Although most of the AIG subsidiaries are regulated by FINRA and the SEC and those regulatory agencies do require the subsidiaries to maintain net capital requirements, that is completely different from maintaining dedicated reserves to pay death benefit claims.
It is true that life insurance companies (the property and casualty arm of AIG) have to maintain assets to pay death benefits but most of the
subsidiaries, and all of the ones throwing these parties, are NOT life
insurance companies. Consequently, these entities are NOT required to maintain reserves. Most of the subsidiaries are either manufacturers of variable annuity investment products like AIG Sunamerica or distributors of general securities products like FSC Securities (whose conference begins next week)
The variable annuities manufactured and sold by these subsidiries do pay death benefits but they are not life insurance and investment risk is held by the client, not AIG. Plus, the death benefits that are paid on a variable annuity is miniscule in comparison to standard life insurance policies so reserve requirements are not really an issue.
But more importantly, the airline leasing and FSC Securities divisions are certainly not life insurance entities and are not required to maintain reserves for claims. FSC is nothing more than an army of stockbrokers!
In other words, AIG absolutely could have reached down and pulled some money from either of those two entities and many other non life insurance subsidiaries.
They are hosting these parties to maintain the illusion that everything is okay at AIG but it simply is not true. While these parties are common throughout the industry, it should be noted that this assumes the company is in a sound operating condition as opposed to bordering on collapse!
Besides, while the timing of the spending isn’t in question, the simple fact remains that were it not for the rescue loan from the taxpayers, the CA conference(s) and all of these subsequent parties would not happen. Our money allowed AIG to continue on with those parties!!
The $85 Billion was originally to help AIG keep the lights on while they
could sell some assets. To date, nothing has been sold. At the
subsidiary level, AIG has reiterated in internal memos that is is
“…business as usual”. They believe they can just sell more insurance products to get out of this mess. Disgraceful.
And the official AIG explanation about rewarding “Top Producers” also is a deliberate distortion of the truth. Those “Top Producers” are, as AIG’s press release explains, independent insurance agents. That means those agents are appointed with more than one insurance company and can sell insurance products issued by competing insurance companies so if they sell a lot of insurance products, they would be eligible to go to MULTIPLE Top Producer conferences. If they sell enough policies from Allianz, ING, AIG, and Manulife, they would have been eligible to attend each of the Top Producer conferences thrown by Allianz, ING, and Manulife. Even if AIG had
exercised some discretion and cancelled their retreat, that would mean the salesmen only got to go to 3 conferences in 2008 instead of 4!
Oh, and has anyone not even thought about this entire concept of “Top Producer” for a second? That means that those “Top Producers” are being rewarded with a weeklong getaway because they sold a ton of insurance policies THAT WERE ISSUED BY A COMPANY THAT BASICALLY COLLAPSED!!! Prrof positive that AIG not only doesn’t care about the taxpayers who are now stockholders, they don’t care about their clients either!! ONLY the salesmen matter to AIG!
What was the additional $37 Billion for? Are hookers that expensive in the Half Moon Bay area?
Well, I do have to agree that if the subsidiairy is that successful, they should get a reward.
Does it have to be an extravagant blowout? Does it have to be an ostentatious, in-your-face flouting of cash?
Perhaps these companies need to learn to express their gratitude in other ways.
Employee recognition does not need to be gold-plated.
News of these is enough to make one a Communist.
Capitalism is failing. Our elected officials show their true talents now; well, basically they are a bunch of good for nothing idiots. In China they would start executing these criminals already.
Hey CASEOPEN,
You sound must be one of AIG’s executives. You are the ignorant! Perhaps you can give all your savings and your kids and grandkis savings to AIG, to bail them out? If AIG indeed have ‘best talent’ that you are referring to, how come they fail?! Why need our taxpayer’s $83 billion bailout! You are stupid!!
Let me just say that ILFC does not take money from AIG and funds itself by its own revenue. The company is a subsidiary of AIG and therefore only uses AIG for their credit rating. The money from the party came from ILFC’s bank accounts, not from the bailout money.
CASEOPEN,
Regarding your Ford example. Again, another stupid comment! If Ford is indeed in trouble, then they’ll need to find ways to cut cost. Layoff people or cut production. BUT I don’t think they would use $450K to throw a big party, let along using taxpayers money. And again, if the purpose of this party is to attract the talented, then how come the company fail in the first place? Is it b/c these talented people are too stupid to see what is going down, or is it b/c they are all in full of greed!! All you people who tries to find excuses for these criminal are pathetic!
SOCIALISM IS ALIVE
Waxman wont do a F-ing thing against the biggest crooks Maxine (super pure racest) Waters and
Barney (bendover taxpayers) Frank
They will all get away with it again and retire will full pensions and life time of the finest healthcare taxpayers will pay for!
Open you wallets tax payers!
They need more party money
They canceled a seaside retreat because of public scrutiny. Now they just need to retract the bailout funds and let them sink. Please.
http://cosmos.bcst.yahoo.com/up/player/popup/?rn=3906861&cl=10121640&ch=4226713&src=news
Canceling is a pretty smart idea, smarter than the party they had at the St. Regis. They could have set themselves up for people to be taking pot shots at them. I can’t believe the guts some people have. Gosh maybe the drive thru at McDonals will have to suffice.
I must copy & paste from a previous AIG article. I have found 2 people that feel they can justify this mess. They must have previously been to one of these affairs or went to this one.
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Sara Says:
October 8th, 2008 at 9:38 pm
Barb,
It’s not a lie. American General Life is totally regulated and has oversight in all 50 states. By the federal insurance commissioner. And this trip was an award trip for agents as Garyd56 above says. Precisely. American General Life had absolutely nothing to do with the mess of AIG. And at this event you all are upset over not one cent of your taxpayer money was spent. NONE.
I understand the financial mess in this country at present is very serious and scary but blaming the wrong companies (and American General Life is a solid strong company and will be one of the first to be sold by AIG—AIG has taken American General Life down. If you can’t see that then you understand nothing about the insurance industry across the board in the U.S. None of them. Whether American General Life, or Prudential, or Met Life, etc. They operate the same and they aren’t using taxpayer money and American General Life did NOT use any taxpayer money on this event. Check out how many companies AIG owns. The own to be looking at is AIG-FC….not American General Life, for gosh sakes.
Garyd56 Says:
October 7th, 2008 at 7:19 pm
If this was a legitimate award trip for top performing Insurance agents, then it is acceptable
Would you like to have worked very hard for the past year to be awarded a trip, then have the award trip pulled from you due to lousy decisions in a division that you have nothing to do with (the Financial divisions)
The timing was worse than anything, but think of the rank and file insurance agent who did nothing wrong and was just looking forward to an award trip
When I first heard of this, it was called a “retreat”, but now it appears it was an award trip only
Please everyone know that the party was paid for by ILFC funds, and ILFC only…AIG contributed NOTHING. It was in the planning for almost a year. The bailout happened the week of the party and canceling it would have meant losing money on deposits, hotels, etc. and also at the time of the bailout, most the party had been paid for already..again with ILFC money only.
I understand everyone’s anger, but the $85 billion bailout was necessary so that ordinary people like you and me around the WORLD who hold AIG insurance policies would not be left in the lurch. We’re talking about 1 company AIG owns that sunk AIG as a whole, and it’s a waste of energy blaming subsidiaries who are spending their own money on things for their employees (not taxpayer money) for the problems.
If you’re going to blame AIG for everything, then surely you should also blame yourself for taking out mortgages that were too expensive for your income and for causing this whole problem in the first place. Sure, the mortgage lenders got greedy because they wanted to make a fast buck under the Republicans’ unregulated eye. But it’s the American public’s fault, too, for making a bet and losing big.
Also, to the people who bought property as investments, thanks a lot jerks. You drove up property values too high, too, and have a huge hand in ruining this country. Instead of investing your money in America by buying stocks, you made property too expensive for normal people and quite possibly ruined the world.
Also, one last note. If your child were to declare bankruptcy, you would probably let that child move back home and leech off of you for a while. But I’m sure that your other children wouldn’t jump in to help. So who’s teaching whom bad values?
Why doesn’t the media, which includes all forms, know what a few of you know & I mean less than a handfull of people that are making comments?
I don’t have AIG insurance nor do I have a mortgage that I am not paying or cannot afford.
No one is “blaming AIG for everything”. I say we just let them fall. The reality is they probably will anyway. Wait and see.
Melanie Says: “I don’t have AIG insurance nor do I have a mortgage that I am not paying or cannot afford…I say we just let them fall.”
I don’t have AIG either, but they are one of the largest carriers of Workers Comp, Business Liability, Private Mortgage Insurance, and many other insurance lines. For them to go under would create even more problems. Someone more in the know about insurance could probably enlighten us on this subject. More oversight is needed when the government steps in, but I don’t believe the government has the brainpower to take over management. Huge issue!
By the way, the ILFC leased just about every airline in the U.S. airplanes. They found a product that was needed to keep the airlines from bankrupting….so they could keep flying you to your grandmother’s house , your company’s other branch (in another state) for that meeting, and to Tahiti for vacation… You may not think airplanes are important, but try to think of a company that doesn’t have it’s hands in AIG in some shape, fashion, or form… Your mortgage…the one you pay on-time and can afford (You being the FEW that didn’t get into a sub-prime)…It’s with a bank, right? AIG probably insures that loan…The part where if you don’t pay it, they pay it… That’s what happened in the sub-prime mess. So, when you want to bring down AIG…remember, you will be coming down with it…and so will a lot of other countries…so don’t think you can just fly (in an AIG insured airplane) to another country (who probably has invested in some AIG’s portfolio) and live there until the smoke clears…
For those employees that are justifing the bad behavior of big business and their own hand made big problems stop making excuses for them! ILFC funds are NOW our funds. Whether or not it happened in the same week as their party or not, cancellation would have been a fraction of the cost of their ’self serving celebration’. No one involved at the top was taken by surprise as much as you would like to think. Shame on them! Steven Hazy, shame on you! Have you sat down and had a heart to heart talk with your employees that pensions are now worthless? They may have reconsidered the party and taken the cash.
What all you negative people are forgetting to acknowledge is the fact that the government gave AIG a LOAN, which they are earning a high interest rate on, they did not GIVE AIG anything. You react as though AIG is just blowing free money. They are using this money to try to pay their bills and keep thier over 100,000 employees employed (they could have taken the easy route and just filed for bankruptcy).
So if you go to someone, and based on your track record they agree to lend you some money and you agree to pay the interest they charge, you can do whatever you want with that money. It is a basic business transaction. You shouldn’t care how they spend their money as long as they pay back the loan and interest. Let’s talk after the loan has been paid back and the government is counting its profits. Besides, if the government didn’t see the value in AIG they would not be willing to lend them the money (not only once, but twice!).
I am outraged over our mainstream media who has distorted this story for pure sensatinalism. This AIG subsidary had nothing to do with the tax payer money, bailout, etc. There were not even executive there, but 1099 brokers who sell products from all companies.
I find out the retreat was planned a year ago and again no tax payer money was used.
My question is why isn’t the media reporting this? Oh yes, this does not sell! This is not sensationalized and takes our focus off the real issue.
This subsidary should go after the meida for distortion.
Yes lets focus on one of the few subsidaries of the comapny that brought in business and pay NO attention the real crooks, the investment Wall Street AIG guys in product who got into these mortgage back securities and brought down this company.
Is the truth that hard to understand?