The October 7th hearing before the congressional House Oversight Committee brought attention to a conference which took place at the St. Regis Hotel from September 24-28 2008. Here's how CNN reported it "Crippled Insurance Giant spent $440,000 on posh retreat for executives". Barack Obama stated in last night's debate " Those executives should be fired"
AIG states that "the conference was held for leading independent distributors with AIG American General and WAS NOT an "executive retreat."
Conferences like this provide an opportunity for top independent distributors to meet with selected members of insurance company management to learn about ongoing developments in the company and to provide them with product, marketing and operational updates. Given AIG's current situation, this conference was even more essential to maintaining critical relationships with distributors and the policyholders they represent.
The vast majority of the attendees at the conference were independent business people and their guests, not AIG employees. In fact, out of over one hundred attendees, there were only 10 AIG American General employees who were there to represent the company and participate in the meetings and discussions. The contract for the conference was arranged in 2007 and the commitment to our distributors was made at that time.
AIG American General has built its business and reputation by keeping commitments - to customers, employees and distributors. It takes its commitments seriously. AIG American General made a commitment to some key distributors well in advance of the current crisis and despite the current situation and heightened media attention, believed it was important to honor that commitment".
Clearly the media has had a field day with selective pieces of the story. But did they do their homework? The website smokinggun.com carries at copy of AIG's bill from the St. Regis Monarch. While the media made much of the spa costs, let's analyze the actual bill:
According to the Academy of Management, attrition clauses are a part of standard hotel contracts and are used to ensure that organizations fulfill their contracted obligations. Attrition fees are applied when a conference group cannot fill at least 80%, or an otherwise agreed upon percentage, of the contracted number of rooms. So AIG DID NOT fulfill their contractual obligation of rooms for the conference. Hmmm wonder why? Perhaps it was a few executives that stayed behind to tend the shop or agents that cancelled.
The poor maids deserve something don't they?
64.71% of the total cost of the retreat was rooms , attrition charge and gratuities to maids bellman etc.
33.35% of the total cost was for Banquets
and the spa treatment represents 5.4% of the whole bill. Is it possible that the top insurance distributors of the successful AIG subsidiary (whose business helps maintain the value of the insurance asset, the same assets that are integral to taxpayers getting value for money loaned) were allowed to bring their spouses? Did it ever occur to anyone that the spouses might be hitting the spa? Did anyone think to interview any attending spouses the sacrifices they've made while their husbands or wives were on the road busting their butts building their businesses for their families? The American General insurance subsidiary is not the one whose activities caused all the problems. That was AIG Financial Products.
Smokinggun's attempt to connect this AIG business event to convicted felon and former Tyco CEO Dennis Koslowski's wife's birthday party and its "exploding cakes and urinating ice statues" is just an abomination.
One more thing that the sherlocks at Smoking Gun and most other media and politicians seem to have missed... AIG paid a deposit of $402,701.04. While it is unclear when this amount was paid, my guess is that it was paid LONG BEFORE the bailout on September 16, 2008!
The alternate point of view was shared by New York Superintendent of Insurance Eric Dinallo, who said:
"I do agree there is some profligate spending there, but the concept of bringing all the major employees together ... to ensure that the $85 billion could be as greatly as possible paid back would have been not a crazy corporate decision," Dinallo told the House committee.
Another example of the ignorant perception out there is embodied in this comment about the announcement in Insurance Journal about the Federal Reserve Board authorizing the Federal Reserve Bank of New York to borrow securities from certain domestic life insurance subsidiaries of AIG (previously lent by AIG to 3rd parties) in return for cash collateral.
"Subject: Don't do it
From : The Structured Settlements 4Real Clue Store
1. The business event cost $443,343.71 not "millions".
2. AIG was ALREADY bailed out!
3. Unless you are phonetically emphasizing latent Scottish heritage, the correct spelling for what you describe is T-H-R-O-W-I-N-G
4. The fundamental strengths of good reading comprehension, financial literacy and spelling cannot be underestimated!