AIG Cuts Bonuses To Pay SEC Settlement
By Michael Ha
NU Online News Service, Feb.10, 4 :27 p.m. EST? In what one industry analyst called a highly unusual move, insurance giant American International Group Inc. disclosed it has tapped into annual bonuses of its executives to partly finance a $53 million settlement with the Securities and Exchange Commission.[@@]
The New York-based AIG took a $53 million charge during the 2004 fourth quarter for the SEC settlement. The agreement followed an SEC complaint concerning AIG's dealings with Brightpoint and PNC Bank, which involved financial transactions that authorities viewed as illegitimate income-smoothing products.
AIG said part of the total cost of the settlement was paid for by the incentive compensation pool from the AIG Financial Products Corp. which was the target of the SEC probe. However, J. Paul Newsome, analyst at A.G. Edwards & Sons Inc. in St. Louis, said this is the first time he has ever heard of such arrangements.
"I've never heard of something like this before," Mr. Newsome commented regarding the method AIG used to finance its settlement.
He said one could sometimes see bonuses reduced for the top executives like the chief executive officer, but cutting bonuses of an entire unit like AIG Financial Products Corp. to pay for charges stemming from regulatory settlements is very unusual, he said.
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