The world’s largest insurance company, AIG, spent $440,000 on a lavish corporate retreat at one of California’s top beachside resorts a few days after accepting an $85bn emergency loan from the US government to stave off bankruptcy.
Details of the week-long getaway enraged legislators at a congressional hearing yesterday where AIG’s former bosses were accused of spending taxpayers’ money on pedicures, golf games and cocktails.
Crippled by losses on financial insurance companies, AIG was bailed out by US taxpayers on September 17 to avert a collapse which risked causing further failures.
The House oversight committee, which is investigating the company’s problems, confronted AIG executives with an invoice from the St Regis resort in Monarch Beach, south of Los Angeles, detailing an eight-day company event which began five days after the rescue.
“Average Americans are suffering economically,” said Henry Waxman, chairman of the committee. “They are losing their jobs, their homes and their health insurance. Yet less than one week after the taxpayers rescued AIG, company executives could be found wining and dining at one of the most exclusive resorts in the nation.”
The bill shows that AIG spent $139,375 on rooms, $147,301 on “banquets”, $23,380 on spa treatments and $6,939 on golf at an eight-day company event which began on September 22.
“US taxpayers will be, in effect, paying for this,” said Elijah Cummings, another Democrat, who demanded to know who was responsible for the outlay. “I think that person ought to be fired.”
Rates for the 325 rooms at the resort are typically upwards of $500 a night and the travel guide Fodor’s gives the place a rave review, saying: “Exclusivity and indulgence carry the day here; you can even have someone unpack for you.”
AIG has defended the event, saying it was to entertain freelance insurance salesmen who sold life, health and accident policies for the group’s US subsidiary.
But former chief executive Robert Willumstad, who stood down as a condition of the government’s bail-out, conceded that the getaway “seems very inappropriate”.
“If I had been aware of it, I would have prevented it from happening,” he added.
Defending their conduct in AIG’s final days, Willumstad and his British-born predecessor, Martin Sullivan, blamed the company’s problems on accounting rules which required it to write off billions of dollars on mortgage-related securities.
Sullivan said these rules had “unintended consequences” in making AIG’s books look worse than they actually were against the backdrop of a “financial tsunami”.
Carolyn Maloney, a Democrat from New York, accused the two executives of blaming accountants for AIG’s difficulties when in fact they had been “wrecking a great company” by gambling on obscure derivatives. “I think you should apologise to the American people for your mismanagement,” she said.
“Looking back at my time as CEO, I don’t believe AIG could have done anything differently,” said Willumstad. “The market seizure was an unprecedented global catastrophe.”