States seek to join in AIG bonus probe

US states probing employee bonuses paid by American International Group using taxpayer money plan to join federal investigators in the matter, while leaving open the possibility of pursuing the case themselves.

Since March, a 19-state coalition has been investigating $165 million (Dh605m) of bonuses paid at an AIG unit whose losses on derivatives would lead to a $180 billion taxpayer bailout. The government now owns close to 80 per cent of AIG.

In a letter on Friday to Neil Barofsky, the special inspector-general of the Treasury Department's Troubled Asset Relief Programme (Tarp), the attorneys general of 11 states said it would be best to collaborate on the matter.

"Despite a pledge to Congress of co-operation and transparency, it remains unclear how much of the $165m in bonuses will be returned to the company and thus the taxpayers who now own AIG," wrote New Jersey Attorney-General Anne Milgram, who has led the coalition of states.

Attorneys general of Arizona, Delaware, Illinois, Kentucky, Maine, Michigan, Mississippi, New Mexico, Ohio and Texas also signed the letter.

An AIG spokeswoman said the company provided authorities with information on its compensation programmes and will continue talking with them.

Barofsky did not respond to requests for comment.

AIG had awarded the bonuses in its financial products unit, where losses tied to credit default swaps led to a $99.3bn loss for the New York-based insurer in 2008.

The state coalition had been co-operating with New York Attorney-General Andrew Cuomo, whose separate investigation spurred some AIG officials to return their bonuses.

In the letter, Milgram suggested that AIG may have been telling only "half-truths" about the bonuses.

She noted that in March AIG told Congress it had paid $120m of bonuses overall, and then two months later said the amount was actually $454m.

Such discrepancies, she wrote, "raise serious questions about the completeness of AIG's characterisations of its financial condition".

AIG was once the world's largest insurer by market value.

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