Governor Rell Takes Action on AIG Bonuses

Urges Congressional Delegation to Adopt New Legislation; Orders Investigation Under Connecticut Unfair Trade Practices Act

Governor M. Jodi Rell today wrote to the Connecticut Congressional delegation urging that new federal legislation be adopted to amend the Troubled Asset Relief Program (TARP) -- the law that provided federal bailout money for insurance giant AIG. The amendment would “explicitly prohibit the use of such funds for payment of bonuses, perks or salary increases to managers or employees” of all companies that have or will receive funding under the Troubled Asset Relief Program (TARP).

“The AIG debacle never should have happened in the first place and we must make sure that no other company tries to use taxpayer dollars in the same manner,” Governor Rell said.

In her letter, Governor Rell said the prohibition should also apply to the automakers who received some $14 billion in TARP money as well as to the hundreds of companies who will receive bailout funding.  The Governor recommended that any future legislation authorizing taxpayer dollars for bailout funding include the prohibition “so that another AIG situation can never occur again.”

“American taxpayers are rightly upset that their tax dollars would be used in such a wrong-headed manner,” Governor Rell said. “It is incredibly inappropriate to reward employees whose mismanagement and avarice have led to the failure of these companies. Our taxpayers are funding a financial system that has collapsed largely due to its own greed and a regulatory framework that failed to curb the abuses. Prompt action by Congress will help assure taxpayers that controls can be put in place to prevent the further abuse of government assistance dollars.”

Also today, the Governor ordered Consumer Protection Commissioner Jerry Farrell, Jr. to investigate the bonuses given out by AIG to determine if the bonuses can be voided under the Connecticut Unfair Trade Practices Act (CUTPA). Governor Rell directed Commissioner Farrell to subpoena the employment contracts that AIG has cited to justify the bonuses.  Because AIG’s financial products subsidiary is located in Wilton, AIG has cited Connecticut General Statutes, Section 31-72, as obligating AIG to pay the bonuses.

“Since the company cited Connecticut law, they will have to live by Connecticut law,” Governor Rell said.  “It is disgraceful that federal funds designed to prevent financial institutions from collapsing and to make it possible for consumers to again borrow money, have instead been used to pay bonuses to AIG in the tens of millions of dollars. I have asked Commissioner Farrell to investigate and determine whether these bonuses can be voided as ‘against public policy’ under CUTPA.”  

“When TARP was enacted just a few short months ago, Congress never intended that those funds would pay bonuses,” the Governor said.  “The Connecticut Unfair Trade Practices Act may very well apply. Once Commissioner Farrell has subpoenaed the relevant documents, he will carefully review those documents and the relevant law.

“AIG has cited a provision in Connecticut law as the justification for paying these bonuses,” Governor Rell said. “I am hopeful that another Connecticut law – CUTPA – will enable us to void the bonus payments.”

The Connecticut Unfair Trade Practices Act, codified as Connecticut General Statutes, Section 42-110a, was enacted in 1973.