So we know that it was AIG’s financial products unit that engaged in those disastrous credit default swaps that helped bring the company to its knees last fall. And it’s staff from that same unit that the firm just paid bonuses to last week, setting off a tidal wave of fury across the country.
That unit, based in London and Connecticut, was led until last year by Joseph Cassano, who negotiated a $1 million-a-month retainer when he left (AIG says it has since terminated that arrangement).
Cassano hasn’t spoken publicly about the debacle he presided over. But in 2004, he gave a deposition in a case in which a former member of his unit was suing the company, claiming he was entitled to a severance package when he left AIG. And some of Cassano’s responses offer a fascinating window into his, and AIG’s, approach to the subject of compensation — the very issue that has now put the company at the center of the current firestorm.
Asked by a lawyer for the plaintiff whether the Financial Products department had any kind of policy governing severance pay, Cassano said it didn’t.
He explained:
When you terminate somebody, you — you don’t pay them severance because they’re generally well-compensated during the periods that they’re with us.
That makes sense to us. But you have to ask: why should that logic apply only to severance issues, and not also bonus payments?
Later, Cassano was asked about another AIG exec, John Finigan, who had run the firm’s trading department before it was subsumed by Cassano’s Financial Products unit. Finigan had been named an “advisor” to Cassano.
Q: And what function does Mr. Finigan perform as an advisor to you?
A: He’s still helping us through the transition.
Q: What is his compensation?
A: I don’t remember. I don’t remember.
Q: Is there a definite period of time where he is to serve as adviser?
A: It was for — it ended on — on a paid basis, March 30th. I believe it was March 30th. John called and asked if we could extend it, and he became — what he was interested in was the — and this — this happened not too long ago — the office services that we were giving him, and medical benefits, and we agreed to — I think he’s on unpaid leave until September, the end of September, and in that period, what we’re going to do is maintain the secretarial services, support services for him, and his medical benefits.
– Q: Since he began in his role as advisor, have you sought his advice?
– A: No
– Q: Was the role, advisor, simply a title as a mechanism to get him paid?
– A: No, there was a thought — that — that you know it was — he had a business that were consolidating, and the question was, were there going to be issues as we go thorugh the integration of the — of the two teams to aspects of the business that he might have been aware of that we’re developing as I went thru the, and you know, and I wanted to be able to continue and use his expertise on, in that area, and his knowledge over those things.
– Q: And as it turned out, you never needed to call on his…
– A: Yeah, most of us — you know, it still may be case that we do use him, but nothing’s materialized yet where I’d need to ask him about something.
– Q: Do you know whether anyone else has sought his services as advisor?
– A: I’m not sure of that. When I asked the question, I was wondering whether other people in the group have — have gone and talked to him about things and — and I just don’t know.
In other words, Cassano can’t point to a single thing Finigan had done to earn what appears to have been a generous salary, even after his department essentially ceased to exist. But no one seems to have objected to keeping Finigan on the payroll or that period.
Given that modus operandi, it becomes a bit easier to see how AIG could think it’s appropriate to spend hundreds of millions on bonuses for staffers who worked in the unit that helped cause the company’s collapse.
We’ll have more on Cassano later today…
