AIG cuts perks, borrows $12B

AIG cuts perks, borrows $12B

The troubled insurer's tapped a total of $82.9 billion in emergency funding. The CEO cuts a deal with N.Y. attorney general to curtail trips, review executive pay.

NEW YORK (CNNMoney.com) -- American International Group, which tapped another $12 billion in emergency government funding in the past week, agreed Thursday to curb millions of dollars of spending on junkets, perks and executive compensation.

The troubled insurer has come under fire in recent weeks from lawmakers and regulators for planning to spend big on corporate trips and events even as the government had lent it more than $120 billion.

AIG agreed Thursday to curb certain expenditures after criticism from Congress and New York State Attorney General Andrew Cuomo. The company canceled 160 conferences and events - some that carried price tags of as much as $750,000.

"We know that the attorney general shares our commitment to rebuilding AIG's business and paying back the U.S. taxpayer, and we will address the attorney general's concerns expeditiously," said Edward Liddy, AIG's chairman and chief executive.

Liddy was installed last month to replace the company's previous management after the Federal Reserve extended an $85 billion loan as AIG (AIG, Fortune 500) was on the verge of collapse. In return, the government took a 79.9% stake in the company.

Fed officials said that an abrupt collapse of AIG could have had dire consequences for the already strained financial markets.

On Oct. 8, the Federal Reserve Bank of New York said it would lend AIG another $37.8 billion. In exchange, AIG said it would give the Fed investment-grade, fixed-income securities as collateral.

So far, AIG has borrowed a total of $82.9 billion, according to data released by the Federal Reserve on Thursday. Taken together, the two loans $122.8 billion.

The government loan comes with a steep interest rate. AIG has said it plans to hold onto its property-and-casualty insurance businesses, while selling off the rest of the company to pay the massive debt.

"We have many remarkable businesses and a flexible plan that will allow us to repay the Federal Reserve loan as quickly as possible under our current arrangement," the company said in a statement. "All AIG insurance companies remain financially healthy."

In a letter to AIG directors on Wednesday, Cuomo criticized the company for "unwarranted and outrageous expenditures." The taxpayer support "makes such expenditures even more irresponsible and damaging," Cuomo wrote.

On Thursday, the company and Cuomo said in a joint statement that AIG has agreed to give Cuomo records related to executive compensation and will work with state officials to recoup "any illegal expenditures."

AIG also said it will establish a committee to give the company's board more oversight of salaries, bonuses, stock options, severance payments, gratuities, benefits, junkets and perks.

Additionally, AIG will not make payments under an employment agreement with outgoing CFO Steven Bensinger. According to company filings with the SEC, Bensinger was entitled to receive nearly $10 million in severance, among other payments.

An AIG spokesman declined to comment on the issue of Bensinger's severance.

Bensinger has left AIG, the company announced Thursday. AIG announced that the new CFO would be David Herzog, who has been with AIG since 2001 and served as comptroller since 2005.

CNN