A former marketing director at Banque AIG told a London court that he was repeatedly assured he’d receive his bonuses, even as he helped clean up a company crumbling from its role in the global financial crisis.
“I asked and received the same answer frequently, that there would be a plan,” said Charles Scheyd, who helped oversee Nordic marketing. Scheyd joined AIG Management France SA — formerly known as Banque AIG — in 2002. He left in 2011 after weathering one of the roughest patches in the company’s history. Scheyd was involved in winding down AIG Financial Products, the unit responsible for money-losing derivative bets backing subprime mortgages that nearly shuttered American International Group Inc.
Scheyd is one of 23 ex-staff fighting AIG for $100 million in bonuses that were set aside under a deferred compensation program and retention plans. The plans provided for “a sharing of the risks and rewards” of AIG’s financial products business, according to court filings. This meant that if AIGFP sustained a loss, compensation accounts would be hurt.
In 2007 and 2008, AIGFP struggled with liquidity. The Fed loaned $85 billion to AIG and Andrew Cuomo — who was New York Attorney General at the time — said in a letter to Edward Liddy, the incoming chief executive of AIG, that “no funds will be distributed” out of AIGFP’s bonus pools on the basis that “these pools should not be used to reward executives ahead of taxpayers.”
As a result of AIGFP’s massive losses, employee bonus accounts were reduced to negative balances. The 23 claimants say that “as a result of political and media pressure,” AIG didn’t pay the sums earned between 2002-2008, despite none of them being “responsible for those parts of AIG’s CDO, CDS or mortgage securities businesses which led to the bail-out,” according to a court filing. Lawyers for the former employees say AIG is obligated to restore the amounts deducted under the terms of the plans.
“There is no obligation to adopt a restoration plan whilst AIGFP remains loss-making and balance sheet insolvent,” lawyers for AIG argued in a court document.
Nevertheless, Scheyd said senior managers were aware of a need to formulate some kind of restoration plan, although it wasn’t clear what the terms would be.
“I expected to see a plan at some point,” he said Tuesday.
A spokeswoman for AIG in London declined to comment on the case. A spokeswoman for law firm Stephenson Harwood, which is representing the ex-executives, also declined to comment.
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