Two former American International Group Inc. employees won awards totaling about $10 million after French judges chastised the insurance giant for trying to block the payment of bonuses they’d already earned to cover for its huge losses.
The Paris court of appeals in March ordered the insurer to pay bonuses worth more than 2 million euros ($2.2 million) to Marc Alperovitch, a former managing director at AIG Management France SA. The AIG unit had no right to withhold the payments, the judges said in a previously unreported decision. That mirrors a ruling last year awarding 6.7 million euros [$7.5 million] to Amos Benaroch, who had also been a managing director at the unit.
“It wasn’t allowed to reduce a bonus amount that had already been vested in order to make Alperovitch bear the bank’s losses,” the judges said in their ruling.
The insurer’s insistence that employees share the pain from huge losses has also been rejected by a British judge in a separate court battle in London, where a group of 23 ex-AIG staff members are claiming $100 million in withheld bonuses. It’s one of the last great payday disputes stemming from the financial crisis, and a court is expected to rule next week whether AIG can re-argue some points before determining how much the group should get in damages.
French Appeals
An AIG spokesman declined to comment on both the U.K. and French cases. The insurance firm has appealed both of the French rulings at the nation’s top court, the Cour de Cassation.
Benaroch, who was fired in 2010, was awarded more than 1 million euros by the Paris employment tribunal in extra severance pay. That initial award was confirmed by the appellate court and adds to the bonus payout.
In both French lawsuits, the Cour de Cassation judges will only focus on whether national law was properly interpreted. The top court has already reviewed the Alperovitch case in 2017, leading to its re-examination by lower judges and the March ruling. AIG will therefore have to bring up entirely new defense arguments to have a chance of overturning the award.
Benaroch’s lawyer, Marie-Alice Jourde, and Guillaume Affri, an attorney for Alperovitch, declined to comment on the rulings.
Billions in Bailout
The AIG rescue began on Sept. 16, 2008, the day after Lehman Brothers Holdings Inc. filed for bankruptcy. The Federal Reserve Bank of New York agreed to provide an $85 billion credit line, to expire within two years, in exchange for an equity stake of almost 80 percent.
Its initial bailout failed to stabilize the company and was revised at least three times to give AIG more capital and additional time to repay. In March 2009, the insurer reported a record loss of more than $60 billion as mortgage-backed securities slumped. The same day, the Treasury boosted its support, pushing the rescue to $182.3 billion.
Around that time, AIG disclosures on staff bonuses worth hundreds of millions of dollars created a furor in the U.S.
Then-President Barack Obama blamed the company’s financial distress on “recklessness and greed” and said bonus payments to traders at the money-losing AIG Financial Products unit were an “outrage.”
Edward Liddy, AIG’s chief executive officer at the time, told the government he would cut bonuses designed to keep employees from leaving the firm but added that while he found them “distasteful,” some payments couldn’t be stopped because they’re binding contracts.
In the British case, the 23 taking the New York-based company to court have emphasized that none of them “were responsible for those parts of AIG’s CDO, CDS or mortgage-securities businesses which led to the bailout.”