States want to join AIG bonus probe

A group of state attorneys general has asked to join a federal investigation into bonus payments at American International Group Inc., asserting that the company had used "half truths" in testimony before Congress.

In a letter to Neil Barofsky, the special inspector general for the Troubled Asset Relief Program, the 11 attorneys general eased away from plans announced in March to conduct their own review.

"I would like to meet with you," wrote New Jersey Attorney General Anne Milgram,  "to discuss ways state regulators can assist in assuring that its investors interests are addressed, while avoiding regulatory duplication that might drain federal taxpayer dollars."

The letter's other signatories included the attorneys general of Illinois, Texas, Ohio and Michigan. Joseph R. Biden III, the attorney general of Delaware and the son of Vice President Joe Biden, also endorsed the idea of a shared investigation.

Milgram led the creation of the coalition of attorneys general after AIG announced plans to pay out $165 million in bonuses, much of it to employees responsible for the creation of the housing-related derivatives widely blamed for the ongoing economic slowdown.

AIG received $180 billion in bailout funds, and the decision to pay bonuses was widely condemned, spurring many employees to give them back.

In her letter to Barofsky, Milgram charged that AIG executives had not been truthful in testimony before Congress.

"In addition to concerns about the propriety of its bonus and retention payments to employees in the Financial Products Unit, we question the candor of some of AIG's responses about the proportion of its TARP payments allocated to its compensation program more generally," she wrote.

According to Milgram, AIG initially told Congress that it paid $120 million in company-wide bonuses, but later raised the figure to $454 million. Such discrepancies, she wrote, "raise serious questions about the completeness of AIG's characterization of its financial position."