AIG to taxpayers: Pay no attention to the $440,000 spa trip
Filed under: Ripoffs and Scams, Wealth, Fraud
If we ever needed an argument against using taxpayer money to bail out private companies who made bad decisions and are teetering on the brink of extinction, this is it. Less than one week after the U.S. government forked out $85 billion related to the American International Group (AIG) mess, the AIG executives took a little jaunt to a California spa and spent $440,000 on their stay.
The executives stayed at the exclusive St. Regis Resort in Monarch Beach, and plunked down $139,000 for rooms, $147,000 for banquets, $23,380 spa services, plus other expenses for alcohol and entertainment. A normal two-night stay at the St. Regis with a "health and wellness" package costs $1,200. Quite the bargain, especially for a company begging for taxpayer handouts.
Company representatives are defending the trip, saying that it was scheduled long before their bailout, and was done to reward successful independent agents who are bringing in revenue for the company. They say that AIG's top 5% to 10% are rewarded in this fashion, a common industry practice.
Industry experts are saying that the lavish trip may have been necessary in order to retain good agents during this critical time. Plus the got a great deal! AIG only paid $1,600 a night for the Presidential Suite, which normally goes for $3,200 a night!
Intellectually, I understand the need to give to the sales agents the things they've already earned. How else does a company keep its best sellers on board, especially during a company crisis? But as a taxpayer who sees the tab for all this bailout activity keep going up and up, I can't help but be miffed about this. How can money be spent on something this frivolous when companies are begging for taxpayers to save them?
Tracy L. Coenen, CPA, MBA, CFE performs fraud examinations and financial investigations for her company Sequence Inc. Forensic Accounting, and is the author of Essentials of Corporate Fraud.
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Reader Comments (Page 1 of 2)
10-08-2008 @ 5:53PM
kelli said...
It's pathetic but does it really surprise anyone who didn't agree with the bailout in the first place? It boils my blood but, I didn't really believe the government would keep tabs on the money after it was handed over to already bloated rich companies.
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10-08-2008 @ 6:05PM
ERNEST said...
While the trip may have been pre-planned, I have the following questions:
1. Would AIG have spent the $440,000 absent receiving the $85 billion gov't bailout?
2. Did the $85 billion bailout request include or anticipate the $440,000 expenditure?
3. Given the current financial crisis would not receipt of the $85 billion bail out be sufficient reward for the job (good or bad) performed by the awardees?
4. No expenditure of this amount or at this time is considered a bargain.
Perhaps my questions/comments lack sufficient information to be justified. Educate me!
Ernest
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1-02-2009 @ 9:28AM
bbb said...
The event was already paid for... with pre-bailout money. In fact, several advisors refused to attend even though they had already qualified. I guess they saw the writing on the wall. AIG wasn't so bright.
10-08-2008 @ 8:05PM
bill said...
there slap on the wrist for doing this.....37.8 billion more usa taxpayers dollars. gotta wonder who's getting paid off.
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10-08-2008 @ 8:07PM
bill said...
no surprises here
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10-08-2008 @ 8:49PM
Lisa said...
Please do your research. It was one of the insurance subsidiaries that had this event for its agents (not employees), not the holding company. The insurance subsidiaries are regulated, solvent, and not part of the issues at AIG, nor part of the bailout. It was the parent and its non-regulated subs that got the government loan (and the government got a pretty sweet deal on it); the insurance subs are legally kept separate to protect policy holders, are separately capitalized and have not had any financial issues. This was not 'paid for by the taxpayers'.
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10-08-2008 @ 8:54PM
Tracy Coenen said...
Where does "the government" get its money? From taxpayers.
10-09-2008 @ 10:30AM
Joe said...
Lisa, wake up and smell the coffee, sweetie. The junket for these execs was in bad taste at a terrible time, plain and simple. You can't sprinkle sugar on something as lavish and frivolous as this by telling me that it was for agents working for an insurance subsidiary and expect it to be palatable to the average American who reads the story. Whether it be directly or indirectly, WE TAXPAYERS ARE PAYING FOR IT! Don't you get it??
10-08-2008 @ 10:13PM
T said...
Just curiousosity here - seems to me that if this entire trip costs 440,000 and it is roughly 1200 for a weekend stay that would make it approximately 350 people on the trip. Now, correct me if I am wrong, but if there are 350 people who did such a great job, thereby DESERVING this perk...... Why did the company fail in the first place????? Something is very very wrong about this!!!
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10-08-2008 @ 10:45PM
Tracy said...
I dont understand - something is not adding up here. If it costs 1200 for a weekend - and the entire trip costs 440,000 that means there was approximately 350 or so people who went on the trip. If these 350 people did such a great job, thereby deserving such a trip - why did AIG fail??????? Please explain....
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10-09-2008 @ 4:37AM
ww77651 said...
The ONLY power we have is Voting Against the incumbents up for re-election. Do not fall for the party lies, or the 'I voted Against it' They are ALL quilty for allowing this. We cannot control who is president, it will be either the Gaint Douche or The Turd Sandwich, but If We Fire EVERY incumbent up there, we will get their attention We vote them in AGAIN, we get the same robbery again
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10-09-2008 @ 6:47AM
Anita Gaither said...
Is the government going to address this issue ? When common people are loosing everything they have, to hear something like this is a slap in the face not just from the company that was suppose to need bailing out but it is a slap in the face from government becasue they are the ones who convinced the public AIG needed help.
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10-09-2008 @ 7:45AM
momma bear said...
We own two very small businesses. They are on the brink of collapse due to the economy. I'd would like to know specifically when we can expect our bailout check from the federal government as I need to book the spa weekend. My nails are a mess and I could really use a massage. I've been so tense.
I don't know who to vote for but this has got to END!!!
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10-09-2008 @ 8:40AM
Mistral said...
TRACY...GOOD POINT.....
I JUST THOUGHT.....REMEMBER THE RUSSIAN REVOLUTION. HUM..MAKES ONE THINK. THE FRENCH REVOLUTION....WERE THEY NOT DUE TO THE FACT THAT THE RICH WERE TOO RICH AND THE POOR WERE BEING STIFFED BY THEM.
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10-09-2008 @ 8:40AM
P said...
If the government doesn't step in and prosecute these people for this spa weekend after we gave them all that money. then we are in for big trouble. AND TO TOP IT OFF, GAVE THEM MORE?????? LORD HELP US!
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10-09-2008 @ 8:57AM
Mark said...
Lisa, Why are you so willing to do damage control for AIG? I bet you are in way to deep to be objective. The tax payers got screwed and will not cut slack for ANY company associated with AIG.
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10-09-2008 @ 8:59PM
Lisa said...
Just stating the facts. Don't like people to crucify a company based on soundbites and headlines designed to make things sound their worst. It may not change your opinion, but I'd prefer if you are reviewing all the facts before you reach that opinion.
10-09-2008 @ 9:06PM
Tracy Coenen said...
Lisa - Subsidiary or not, AIG is still AIG. When the subsidiaries spend money, where does it ultimately come from? If the subsidiaries had more money, maybe the parent wouldn't need a bailout. It's nice to pretend that these expenditures don't have an impact on the parent company, but they do.
10-09-2008 @ 9:53AM
Deb said...
Could possibly the reward for these "high achievers" is that with the bail out they can now keep their jobs?
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10-10-2008 @ 9:45PM
Lisa said...
Tracy, I find it difficult to believe you're a CPA based on your comments. The subsidiaries 'get their money' by generating cash flow from their own operations; yes, they are making money -- check with the insurance commissioner in your state. Why is the parent in trouble if the insurance subs are making money? Because the insurance subs are regulated and the parent is not. If the parent gets in trouble do to actions at its non-insurance subsidiaries, it can't go to the insurance subs to save itself. The amount of money the parent can pull from the subs is *legally restricted* by the insurance regulators in each state; the parent can't raid them. Those laws and regulations are in place to protect the policyholders and make sure the regulated insurance subs stay solvent and able to pay claims, which they have. If the parent had not received the government loan, it would have filed for bankruptcy, but the insurance subsidiaries would not have been included in the bankruptcy filing (you are probably aware that companies can put some of their subs into bankruptcy and not others). So, no, all parts of AIG are not the same, except in the minds of the media who can't miss an opportunity for a sensationalist story to rile up the public and generate lots of angry comments.
Again, do your research first and then complain about it all you like.
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