The accounting scandal at
American International Group
is forcing the company to spend more money to insure its board members against future litigation.
In restating its financial results for the past five years, AIG disclosed Tuesday that the cost of buying insurance for its board members has gone up 249% this year. The premium on AIG's directors and officers' liability policy is now $32.8 million, up from $9.4 million.
The policy, which went into effect on May 25, is for one year.
It's not unusual for premiums on so-called directors and officers policies to rise in the wake of a corporate scandal. Premiums tend to rise as a company faces a tidal wave of shareholder class actions.
What's ironic is that AIG is one of the nation's largest underwriters of D&O policies. The AIG filing did not disclose the underwriter of its former and new policy.
Meanwhile, AIG also disclosed that it paid out a handsome bonus in 2004 to Maurice Greenberg, who resigned in disgrace in March after nearly four decades at the helm of the giant insurer. AIG disclosed that it paid Greenberg an $8 million bonus last year, up from $6.5 million in 2003.
Greenberg's base salary of $1 million for serving as chairman and chief executive was unchanged from the prior year.
But that wasn't the only bonus Greenberg received. Starr International, the controversial firm that owns 12% of AIG's shares, paid out a $2.6 million bonus to Greenberg in 2004, up about $500,000 from 2003.
In all, Starr paid out $2.45 million in salary and bonuses to other AIG executives, according to the filing. Martin Sullivan, the longtime AIG employee who replaced Greenberg as CEO, earned $200,000 in salary and bonuses from Starr.
Starr was set up decades ago to provided extra compensation and deferred pay to top AIG executives. In light of the accounting scandal, AIG is trying to untangle itself from Starr. Greenberg has indicated he intends to continue to run Starr, even as he grapples with the fallout from the accounting scandal at AIG.
In the filing, AIG said its reporting of the Starr bonuses and salary reflects its best estimate because "AIG does not currently have full access to the books and records'' of Starr.
Last week, New York Attorney General Eliot Spitzer filed civil fraud charges against AIG and Greenberg, charging the former insurance industry titan with orchestrating a series of accounting tricks and frauds to help prop up AIG's stock price.