Dear AIG – I quit.
I’ve been waiting for stories to be released from AIG executives who elected to leave the company during the last week due to attacks from political hacks who never want to let a good crisis go to waste.
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Scott at Power Line provides us a link to the OpEd piece in today’s New York Times, with an e-mail from Jake DeSantis to AIG CEO Edward Liddy. He quit, and I don’t blame him one bit. Scott notes his hat tip to Real Clear Politics.
Update: Morrissey over at Hot Air notes…
Last week, I wrote that I expected Liddy to say this to Congress in response to their entirely hypocritical, false, and calculated outrage. Liddy apparently didn’t have the courage of Jake DeSantis, who refuses to stick around and be abused by people who have no clue as to what he does and how he got compensated for it. DeSantis does, and the Times should get some kudos for giving him a voice.
But Ed, maybe this shows the character of Liddy to sit up there and take it? He knew what was coming in that committee room – crap from a bunch of political blow-hards. Maybe he’s taking his job seriously and wants to really get the job done – clear the remaining $1.5-plus trillion in “toxic” assets? Someone has to do it.
It would certainly have felt really good to tell Congress off and throw it right back at them, but would that have helped solve the issue at hand?
—
Here is the e-mail in full. DeSantis agreed to a salary of $1 per year while dismantling AIG-FP. My emphasis in bold.
DEAR Mr. Liddy,
It is with deep regret that I submit my notice of resignation from A.I.G. Financial Products. I hope you take the time to read this entire letter. Before describing the details of my decision, I want to offer some context:
I am proud of everything I have done for the commodity and equity divisions of A.I.G.-F.P. I was in no way involved in — or responsible for — the credit default swap transactions that have hamstrung A.I.G. Nor were more than a handful of the 400 current employees of A.I.G.-F.P. Most of those responsible have left the company and have conspicuously escaped the public outrage.
After 12 months of hard work dismantling the company — during which A.I.G. reassured us many times we would be rewarded in March 2009 — we in the financial products unit have been betrayed by A.I.G. and are being unfairly persecuted by elected officials. In response to this, I will now leave the company and donate my entire post-tax retention payment to those suffering from the global economic downturn. My intent is to keep none of the money myself.
I take this action after 11 years of dedicated, honorable service to A.I.G. I can no longer effectively perform my duties in this dysfunctional environment, nor am I being paid to do so. Like you, I was asked to work for an annual salary of $1, and I agreed out of a sense of duty to the company and to the public officials who have come to its aid. Having now been let down by both, I can no longer justify spending 10, 12, 14 hours a day away from my family for the benefit of those who have let me down.
You and I have never met or spoken to each other, so I’d like to tell you about myself. I was raised by schoolteachers working multiple jobs in a world of closing steel mills. My hard work earned me acceptance to M.I.T., and the institute’s generous financial aid enabled me to attend. I had fulfilled my American dream.
I started at this company in 1998 as an equity trader, became the head of equity and commodity trading and, a couple of years before A.I.G.’s meltdown last September, was named the head of business development for commodities. Over this period the equity and commodity units were consistently profitable — in most years generating net profits of well over $100 million. Most recently, during the dismantling of A.I.G.-F.P., I was an integral player in the pending sale of its well-regarded commodity index business to UBS. As you know, business unit sales like this are crucial to A.I.G.’s effort to repay the American taxpayer.
The profitability of the businesses with which I was associated clearly supported my compensation. I never received any pay resulting from the credit default swaps that are now losing so much money. I did, however, like many others here, lose a significant portion of my life savings in the form of deferred compensation invested in the capital of A.I.G.-F.P. because of those losses. In this way I have personally suffered from this controversial activity — directly as well as indirectly with the rest of the taxpayers.
I have the utmost respect for the civic duty that you are now performing at A.I.G. You are as blameless for these credit default swap losses as I am. You answered your country’s call and you are taking a tremendous beating for it.
But you also are aware that most of the employees of your financial products unit had nothing to do with the large losses. And I am disappointed and frustrated over your lack of support for us. I and many others in the unit feel betrayed that you failed to stand up for us in the face of untrue and unfair accusations from certain members of Congress last Wednesday and from the press over our retention payments, and that you didn’t defend us against the baseless and reckless comments made by the attorneys general of New York and Connecticut.
My guess is that in October, when you learned of these retention contracts, you realized that the employees of the financial products unit needed some incentive to stay and that the contracts, being both ethical and useful, should be left to stand. That’s probably why A.I.G. management assured us on three occasions during that month that the company would “live up to its commitment” to honor the contract guarantees.
That may be why you decided to accelerate by three months more than a quarter of the amounts due under the contracts. That action signified to us your support, and was hardly something that one would do if he truly found the contracts “distasteful.”
That may also be why you authorized the balance of the payments on March 13.
At no time during the past six months that you have been leading A.I.G. did you ask us to revise, renegotiate or break these contracts — until several hours before your appearance last week before Congress.
I think your initial decision to honor the contracts was both ethical and financially astute, but it seems to have been politically unwise. It’s now apparent that you either misunderstood the agreements that you had made — tacit or otherwise — with the Federal Reserve, the Treasury, various members of Congress and Attorney General Andrew Cuomo of New York, or were not strong enough to withstand the shifting political winds.
You’ve now asked the current employees of A.I.G.-F.P. to repay these earnings. As you can imagine, there has been a tremendous amount of serious thought and heated discussion about how we should respond to this breach of trust.
As most of us have done nothing wrong, guilt is not a motivation to surrender our earnings. We have worked 12 long months under these contracts and now deserve to be paid as promised. None of us should be cheated of our payments any more than a plumber should be cheated after he has fixed the pipes but a careless electrician causes a fire that burns down the house.
Many of the employees have, in the past six months, turned down job offers from more stable employers, based on A.I.G.’s assurances that the contracts would be honored. They are now angry about having been misled by A.I.G.’s promises and are not inclined to return the money as a favor to you.
The only real motivation that anyone at A.I.G.-F.P. now has is fear. Mr. Cuomo has threatened to “name and shame,” and his counterpart in Connecticut, Richard Blumenthal, has made similar threats — even though attorneys general are supposed to stand for due process, to conduct trials in courts and not the press.
So what am I to do? There’s no easy answer. I know that because of hard work I have benefited more than most during the economic boom and have saved enough that my family is unlikely to suffer devastating losses during the current bust. Some might argue that members of my profession have been overpaid, and I wouldn’t disagree.
That is why I have decided to donate 100 percent of the effective after-tax proceeds of my retention payment directly to organizations that are helping people who are suffering from the global downturn. This is not a tax-deduction gimmick; I simply believe that I at least deserve to dictate how my earnings are spent, and do not want to see them disappear back into the obscurity of A.I.G.’s or the federal government’s budget. Our earnings have caused such a distraction for so many from the more pressing issues our country faces, and I would like to see my share of it benefit those truly in need.
On March 16 I received a payment from A.I.G. amounting to $742,006.40, after taxes. In light of the uncertainty over the ultimate taxation and legal status of this payment, the actual amount I donate may be less — in fact, it may end up being far less if the recent House bill raising the tax on the retention payments to 90 percent stands. Once all the money is donated, you will immediately receive a list of all recipients.
This choice is right for me. I wish others at A.I.G.-F.P. luck finding peace with their difficult decision, and only hope their judgment is not clouded by fear.
Mr. Liddy, I wish you success in your commitment to return the money extended by the American government, and luck with the continued unwinding of the company’s diverse businesses — especially those remaining credit default swaps. I’ll continue over the short term to help make sure no balls are dropped, but after what’s happened this past week I can’t remain much longer — there is too much bad blood. I’m not sure how you will greet my resignation, but at least Attorney General Blumenthal should be relieved that I’ll leave under my own power and will not need to be “shoved out the door.”
Sincerely,
Jake DeSantis
33 Comments
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I believe the term is "scapegoat," used as a distraction from the real wrongdoings/ineptitude of our elected hacks.
Hokayyy. I agree to work for "$1" a year, out of the pure goodness of my heart and dedication to the company. But of course, I expect a "bonus" of $750k. No wonder AIG's in trouble. If it's "guaranteed", it ain't a "bonus", is it??
@tabman – it is a retention bonus. Completely legal and used frequently. Sorry you are bitter that some people make more money than you. Class warfare will get you nowhere. By the way, how much money per year is too much?
It's funny how people call the Congress Poltical hacks. Republician and Democrats are the same. The people that run for office are either business people that made their fortune, poltical major, or lawyers. Remember, they are in the Millionare Club. Anyone could blame any past or present Administration. But, when I bought my house in 2002 with money down, I remember giving my last paystubs and bank accounts to the bank. So, what happen between 2002 of september till the burst? Who fell asleep at the wheel? Did the majority in congress just get in a couple of years ago? Who was the President then? Did he let business do whatever they lobbied to do?
What it boils down is you can't have either party being the Majority. Like with Carter, W and Obama. You need a balance, gridlock.
The Executives said it was in their contracts for the Bonuses. Isn't a Bonus based on performance. Can contracts be broken legally, yes. They break Union contracts all the time. Why not them? They use Force Majeure when 9/11 with the Airline Employees. The Airlines threw the contracts out with the employees during a crisis. Aren't we in a financial crisis?
If you see a Bum begging for money on the street corner do you drive by, whey he is asking money for food? I do, because he'll just buy beer anyway. Well, AIG had a big party with our money. That's the point.
Goodness grief, these were not performance bonuses you big dope! (A little wink to my buddy Mark Levin right there) If you don't understand that basic premise and how this all was set up, you need to do a bit more reading before commenting.
I have said that, if I were an AIG employee, I would rather sweep floors or flip fries than to undergo the exposure this bailout would cause. The public and political hypocrisy here is so incredible to me that I have openly wished that the employees of AIG, from top to bottom, would walk out. I wonder, what would these politicians say then. Their position on these issues change every day primarily because they are constantly covering their own involvment in this financial system failure. I am in constant awe of the ability of these politicians to stand in front of the camera and spew their outrage.
Mr. DeSantis:
Cry me a river. You, sir, epitomize what is wrong with Wall Street. Let me explain.
Due to the justifiable, necessary, and warranted outrage at the economy-destroying behavior of your colleagues (Cassano & Co. at AIG-FP), the promises made to you regarding bonuses have been broken. I will go as far to say that they have been unfairly broken in your case. You have a beef. It is your response to this situation that has me feeling less than sympathetic toward your "plight".
As you eluded to early in your resignation (quit) letter, now is the time for "a sense of duty to the company and to the public officials who have come to its aid". In other words, its a time for patriots. Yet, in light of the enormity of our financial crisis and the role your company played in it, even if you are personally blameless, you choose to quit. Just as you near the end of winding down your sale of your division, you pull a temper tantrum and quit. What a role model.
My favorite two books, which I keep in my nightstand for quick reference whenever I have a "woe is me" moment, are "Company Commander" and "Band of Brothers". Each, IMHO, should be required reading in B-schools across America. Could you imagine Dick Winters telling General Taylor, "I quit" because he was promised that he would only be fighting in Normandy for 1o days instead of a month? Of course he didn't. In that enormous crisis, not of his doing, he was asked to sacrifice for his county. He never wavered, nor did the heroes who served with him.
The opportunities afforded you, which you rightfully took advantage of, were provided to you in part by the sacrifice of those who went before you. You did not achieve your success in the bubble which you so shamefully refuse to remove yourself from. You had help. Now is your time to give back. Yet your answer is the most un-American of answers, "I quit". It only confirms the deep suspicions that the public has of Wall Street.
The economic situation is not a fighting war. DeSantis was doing what was right for a year (you completely agree). At what point do you walk away from a job (not a war)? Maybe it's when you end up working 60 hours a week and don't get to see your kid's soccer game? Maybe when your wife has to make a decision on her own when she wanted your counsel? Maybe it's when morale of fellow employees is shot and you see them leaving to work for other companies – and are now happy? Maybe when your doctor tells you to slow down due to your high blood pressure. …
Then, maybe it's the death threats that come in via e-mail, the mobs outside your workplace, or when your company CEO throws you under the bus and says you don't deserve it? Maybe it's the 40 nut-jobs stopping by your home on a Saturday afternoon to scream at you from the end of your driveway, or politicians like Chris Dodd and Barack Obama whose outrage is total bull s&*^ since they are the ones that approved your pay in the first place.
Maybe it's Chuck Schumer who goes public and says if you don't give it back, we're going to take it back by force.
This is not a fighting war and the analogy does not fit. How long would you stay at your job in these conditions?
Steve,
Re your reply to DemGeorge:
1. "she wanted your council" – how about counsel?
2. "moral of fellow employees" – how about morale?
3. "retention bonuses" – AIG paid $16 mill to people who are no longer employed there. How can you call payments to former employees "retention" bonuses?????
Thanks for the note about my spelling. Fixed.
These retention bonus contracts were set up so people who completed their work – let's say three months ago – did not get the retention payment until a future date. I think it was March 13 right?
As an example, you sign on to do a six month "wind-down" of a specified number of accounts. You're told that this is a dead end job and when you are done, there is no more job for you. You do your work and untangle the mess you have been assigned to untangle. You're done early (or in six months… whatever) but in the contract it says you will not be paid until March 13.
At least that is what it looks like to me, and to many others who have actually completed some research on the subject. If I'm wrong on this – let me know. But from what I understand, the employees who got their retention payment on March 13 and left months ago had completed their work and had to wait until March 13 to get the payment.
Just a note, Ed Morrissey over at Hot Air has another good wrap-up posted today.
Class warfare? You bet it is. Always has been and always will be. Its called politics and its a good thing.
However, presenting it as you do by continually stuffing staw into the "class envy" scarecrow, you conveniently disregard the reality of the conflict.
In your world, it is easier to describe your critics as people who are "bitter" toward people who earn more money than they do. Reality, however, is a different place. In the real world, people are bitter at those who have not earned, but, rather, have scammed. They've scammed the hard earned cash of those who have, in some cases, worked hard all their lives only to see the fruits of their labor significantly diminished.
In the real world, the hard working working folks who play by the rules, who strap it on and get it done day after day, are seeking sanctions against those few who have forfeited their fiduciary obligations to the rest of us. We do this, as we must, to try to restore integrity and trust to our system. We are defending ourselves. From this point of view, those "poor souls" from AIG are lucky that only one busload of "protesters" showed up on their front lawns.
Although I trust him when he says he was not involved in the CDS shop, Mr.DeSantis would be wise to recognize the absolute validity of the public anger directed at his (former) company. Bad things happen to good people. He may very well be "collateral damage" to the justified anger directed at AIG. But quit? Are you kidding me? He should look at this as an opportunity to rise and meet a cause "greater than oneself". In doing so, he might be taking a small, unrecocnized and selfless step toward restoring the trust lost by his colleagues. Ironically, by serving that cause, he will benefit in the long term, as will the rest of us.
Yes, Congress including more than a few brand name Dems have turned this into a Lucy Skit. They are doing nothing more than post-factum CYA. Chris Dodd, the Senator from AIG, is frantically trying to dig a foxhole now that the shells are exploding all around him. Mr. DeSantis should recognize cowardice when he see it. Instead of standing up to cowardice, he succumbed to it.
So you've made that point twice now and ignored my reply. Ensure your comments are shorter in the future. Read the TOU about 75 words or less.
The same people who love to use the "class envy" term hung enron poster in their home until the very end. Then they state that they "always knew".. I know, I got a dozen or so of these coolaide drinkers in MY family.
I admit it, I don't like people much, and a lot of it is because if you give people a chance to "oversee" themselves, nine out of ten times, they give in to temptation. And since EVERYTHING is run by people, there is NO chance that this ever gets fixed.
Capitalism MAY be the best system in the world, but its HARDLY beyond critisizm and the DOWNSIDE is a whole bunch of dishonest greed. The people to blame for this are too many to mention.
Let's establish, from the beginning, that I am not motivated by any sort of class antagonism. I am a cardiologist, the son of two well paid dentists, and have not grown with any of the strictures Mr. DeSantis mentions. I still feel outrage at the disconnect he shows with the reality of the majority of the population of this country, and even more so with the rest of the world. I have practiced my profession for 34 years, and never, ever have I come close to the income he so comfortably was able to throw away. His inability to grasp the ridiculous level of privilege he and his colleagues have reached, is infuriating to the rest of us. Show a little humility, accept that you and your company have ruined millions, take your lumps, since the rest of us have already, and shut up!!
And I guess I feel outrage concerning your disconnect with the fact that Mr. DeSantis received death threats, was not involved with the AIG-FP division's decisions that cost people millions, and was targeted personally by the federal government to take what was his.
Seems like those who disagree with me don't want to touch those facts and answer me the question. How long would you stay at a job under the conditions Mr DeSantis was in? Well?
So comfortably? Are you kidding? We're talking about death threats and groups like ACORN sponsoring bus tours to your house so people can get out and scream at you. Then add in the threats from the federal government… goodness….
Thrown away? Dude, he's giving to charity whatever he's got left after Chuck Schumer and the New York and Connecticut AGs steal from him.
If you can give $ 750,000.00 to charity, more power to you. I repeat, I feel no compassion for these people. If you are one of them, same to you, if you are not, please don't be a sycophant, they will not thank you for it.
Dear Mr. De Santis,
Why not consider doing us a favor by writing down the names of the former employees who did in fact bring down AIG. It doesn't have to be made public, but I'm sure the Attorneys General of New York and Connecticut would know what to do with them. You and your honorable collegues would then have some form of vindication and the real culprits would have an opportunity to sit in the frying pan for a while!
Oh yeah, that's his job for certain and I'm sure it will take all of the heat off. Those names are already known, there is no mystery there. Do you suggest that we harass those individuals too? Why are we not "harassing" the people who started this entire mess? Congress forced banks to loan money to people who could not afford it – they were the enablers.
And while we're at it, when will Rahm Emanuel give back the the money?
As an aside to this controversy, I know think there would be as much outrage if the wages of ordinary working people rose at the same rate as the salaries and bonuses of executives over the past 25 years. Think of coal miners and others such as roofers and asphalt layers in states such as Georgia and Alabama. Even staunch supporters of capitalism would agree that sometimes things become unbalanced.
Crap. It's the same old "rich get richer and the poor get poorer" theme and it's not true. When you look at the IRS data – hot dang – you find out that the lower class have moved into the middle class, and the middle into the upper. Take a look at the post I wrote back in November.
It seems like everyone is looking for someone to blame. A good start would be to vote out everyone in congress. Democrats and Republicans alike. Then maybe with a new crop of youthful people who could at least make an effort to work with the president to clean up this financial mess. This would be people who have taken the oath of office to serve this great country and all of the people in it. Not the other way around. Remember your big chance to help this come about will be the next time you vote. Otherwise this country will not last.
Who knows, someday you might wake up and realize we live within a corrupt government. May you all wake up in the morning with what you had when you went to bed.
Best of luck to you Jake DeSantis. I'm sorry you and your family have had to live through this terrible time.
Remember, people are ignorant of the facts. The citizens of the USA are uneducated and ignorant (and yes, that includes the media). Very quick to judge and hang a man without knowing the facts. It's another reminder of how bad our education system in the USA really is.
Peace to you and yours.
"How long would you stay at your job in these conditions?"
In all honesty, I don't know, just as I don't know how I would have responded to combat. I have been lucky enough not to have confronted a situation like this. But this isn't the point. He has every right to quit. But he quit in a very public way. He put himself out there. I responded. You didn't like my response and here we are.
And he was attacked in a very public way, and has the right to defend himself.
Nuff said on this subject unless something new comes up.
I do agree that the employees should be compensated for having put in a lot of extra effort during a very difficult year. However, the point Mr. DeSantis is missing is exactly one of the reasons we're in the mess we're in… Even if he worked 18 hours a day, for 365 days straight, with a bonus of $700k+, he is making over $112/hr, far more than the majority of working Americans. Get real.
Eileen – thanks for your comment. This AIG executive certainly is in a high tax bracket, as a matter of fact there are less than 1 million tax returns filed – out of more than 138 million – that show income greater than $500k.
But did you also know that group – the top 1/2 percent of earners – contribute more than 35 percent of the income taxes paid to the federal government?
So, how much is enough? At what point do you think that earners should just route the excessive pay directly to the government? Serious question. How much?
Best be careful. These top earners might just make so much money that they could stop working and live off their savings.
I know you feel it is just wrong to make this kind of money, and that really is an important distinction between a liberal and a conservative.
Maybe the real problem is calling them "bonuses" instead of "deferred compensation." Most people think of bonuses as something above and beyond the regular salary or wage, whereas DeSantis has shown that is not necessarily the case.
Whether you agree that the pay is too much or not, the best cure would be to simply pay them with a monthly check or some other typical method of recompense instead of a "bonus."
The real problem is that the government, or the slob sitting next to you, thinks that they should be empowered to tell you what you should earn or what you are worth. Like anything else, your services are worth not a penny more than someone is willing to pay for them. If AIG decided that was reasonable, and the employee agrees, the deal is done. I mean, when do they start going after the compensation of lesser paid employees at AIG? If a middle manager makes $75K, and it is more than I make, should I demand that he return the difference because we bailed them out?
This stinks of socialism/Marxism/communism.