NU Online News Service, March 26, 12:26 p.m.EDT

There was no discrepancy between American International Group'schief executive approving an expedited payment of bonuses and hisremarks that he was unhappy with them, a company spokesperson saidyesterday.

AIG CEO Edward Liddy wrote Treasury Secretary Timothy Geithneron March 12, stating that he found the necessity to pay retentionbonuses to executives at the troubled AIG Financial Products unit"distasteful and difficult." He used the same terms in anappearance before a congressional committee.

But yesterday, in an open letter to Mr. Liddy in The NewYork Times announcing his resignation, Jake DeSantis, anexecutive vice president for the AIG Financial Products' profitablecommodities section, said Mr. Liddy left him feeling "betrayed" andmay have done an about-face under political pressure afterapproving early payment of the bonuses.

Mr. DeSantis wrote that most of the employees at FinancialProducts had "nothing to do with the large losses" caused by thesection dealing with credit default swaps, which forced the companyto seek a government rescue.

"My guess is that in October, when you learned of theseretention contracts, you realized that the employees of theFinancial Products unit needed some incentive to stay and that thecontracts, being both ethical and useful, should be left to stand,"his letter said.

Mr. DeSantis wrote that this realization may have been why Mr.Liddy "decided to accelerate by three months more than a quarter ofthe amounts due under the contracts." The move, he said, signaledto employees that they had Mr. Liddy's support, "and was hardlysomething that one would do if he truly found the contracts'distasteful.' That may also be why you authorized the balance ofthe payments on March 13."

He wrote that the decision releasing $40 million in bonus moneywas an ethically and financially astute move, but "it seems to havebeen politically unwise. It's now apparent that you eithermisunderstood the agreements that you had made–tacit orotherwise–with the Federal Reserve, the Treasury, various membersof Congress and Attorney General Andrew Cuomo of New York, or werenot strong enough to withstand the shifting political winds."

An AIG spokesperson, Christina Pretto, said there was "nothinginconsistent" about Mr. Liddy's statements, adding that hisdecision to pay the bonuses was based on legal analysis of thosecontracts, and were grounded in a risk/reward system for employeeswho are working to unwind a Financial Products business with a $1.6trillion derivatives book

He has made it clear, she said, that they were put in place long"before he came [to AIG], and he does find them distasteful. Thisis what he inherited."

She released a statement that "Ed [Liddy] deeply appreciates thefrustration expressed in this letter, and believes that the recentvilification and harassment of AIG employees is grossly unfair andunwarranted."

"As Ed noted in his testimony to Congress, most of today's FPemployees had nothing to do with the credit default swaps that wereat the heart of the company's liquidity crisis," she said. "FPemployees continue to successfully execute precisely the job askedof them: de-risk and unwind the FP business. They have reduced thetrade count from 44,000 to 28,000–nearly 40 percent."