AIG wins U.K. appeal over $100M bonuses dispute
The ruling will stop a group of ex-employees seeking more than $100 million in bonuses dating back to the financial crisis.
A U.K. appeals court dealt the final blow to a group of former AIG Financial Products (AIGFP) employees’ hopes of collecting $100 million in bonuses dating back to the financial crisis, Bloomberg reported.
Ruling in favor of AIG, the Court of Appeals overturned a November 2018 ruling that might have allowed for 23 former traders, analysts and managers at the London branch of AIG Management France SA and AIG Financial Products to pursue payment for unobtained bonuses, said Bloomberg.
The decision is the latest development in a years-long legal battle between the insurer and its former employees that started at the height of the financial crisis in 2008. At the time, governments clashed with bailed-out banks and insurers to stop them from paying bonuses. In AIG’s case, the Federal Reserve loaned $85 billion to the company’s Financial Products unit under the agreement that “no funds will be distributed” out of AIGFP’s bonus pools on the basis that “these pools should not be used to reward executives ahead of taxpayers.”
The $100 million in dispute in the London case is the sum that was set aside through a deferred compensation program that provided for “a sharing of the risks and rewards” of the business.
In a court filing last year, William Dooley, chief of AIG Financial, said the insurer would have “been under extreme pressure” from the U.S. to stop the payouts and pursue bankruptcy instead.
In June 2019, the group of ex-employees won the backing of a lower U.K. court judge who ruled that AIG can’t assert that its Financial Products unit would have rather gone bankrupt than pay the bonuses to the 23 former traders and managers. AIG then took the case to the Court of Appeals in November 2019, arguing that the bonus balances were wiped out unless the unit collected distributed incomes from which to restore the balances. AIGFP asserts that it has not been profitable since 2008.
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