To paraphrase Ricky Ricardo's repeated warning to his wacky but lovable spouse in "I Love Lucy," AIG CEO Ed Liddy will have "a lot of 'esplaining' to do" when he is dragged before Congress once again on May 13, not only about his company's continuing struggles, but about his own perks.
In case you missed our recent news coverage, Mr. Liddy has agreed (supposedly under the threat of a subpoena) to be grilled before the House Oversight and Government Reform Committee, after postponing his scheduled May 6 appearance because AIG's first-quarter earnings report (revealing a net loss of $4.35 billion) was due the next day.
As reported by Washington Editor Dave Postal, Mr. Liddy will be called upon to say whether the poster child of the bailout generation will require any more government funds to stay afloat. He will also be asked once again to lay out exactly how AIG got itself into this mess, what the company has done with the tens of billions in public money it's received, as well as to speculate on whether Washington was in fact AIG's only hope--both when the problems emerged last fall and now.
Those are mighty tough questions, for sure--especially for someone responsible for AIG's recovery, not its fall from grace.
Of course, Mr. Liddy is no stranger to this harsh spotlight, having already been dragged in front of grandstanding lawmakers to explain himself, as if he were somehow to blame for the reckless credit default swaps that left this once seemingly invinsible juggernaut to the not-so-tender mercies of Uncle Sam.
Through it all, supporters have reminded critics acting so high and mighty up in the peanut gallery that the Mr. Liddy receives only $1 in salary for his services, and that the former head of Allstate came out of retirement because of a noble sense of duty to save his country's top insurance organization.
That white knight image might be tarnished, however, by recent reports revealing that AIG spent some $460,000 on Mr. Liddy's behalf last year--quite a sum, especially since he came on board in September.
I have to imagine Congress will want to know how Mr. Liddy managed to rack up that much in expenses in less than four months? As reported by our own Dan Hays, AIG's 10K filing noted bills of $47,000 for air commuting between his Chicago home and AIG's New York headquarters, $38,000 for his New York apartment, and $31,000 for car services! That's a pretty steep expense account!
Since AIG insists Mr. Liddy generally flew commercial rather than on a corporate jet, you would think the frequent flier miles alone would earn him some free trips! As for the car service, it might have been cheaper for AIG to have just bought him his own corporate wheels!
AIG also paid $162,000 to Mr. Liddy's attorney "to develop appropriate compensation structures," as well as another $180,000 to offset any tax obligations for Mr. Liddy's travel, living and legal expense reimbursements. AIG said such a deal was necessary so Mr. Liddy could "avoid his effectively having to pay to work at AIG."
As for reports that Mr. Liddy was in line to cash in big time down the road if he turns AIG around, AIG put that to rest, noting that while "an equity arrangement for Mr. Liddy was substantially negotiated, Mr. Liddy has now stated that he does not think it would be appropriate to enter into the proposed arrangement and has declined to move forward with it, especially in light of changing business, regulatory and legislative considerations."
Actually, I wish AIG would stop the pretense of the $1 salary, pay Mr. Liddy a fair wage for a top-notch CEO (complete with incentive compensation for getting the company back on its feet), and let him handle his own additional living expenses! Or at least hire a replacement who actually lives in New York--thus cutting out the air and ground travel costs!
At least AIG did note that while in the past, the company had provided club memberships and other "recreational opportunities," Mr. Liddy "has not participated" in such perks, and the company has "largely eliminated" them. Thank goodness for small favors!
What do you folks think?
