I found this letter that Jake DeSantis wrote to resign from AIG. At first, I was impressed but when I read the figure of his bonus which he will not return I was staggered. I had no idea. Sorry Mr. DeSantis. The amount is about $742,000. How does anyone justify that?
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 was named the head of business development for commodities. Over this period the equity and 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.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
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
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Comments: 28
It is horrible that as a country we have massive unemployment, yet those fat cats were taking bonuses and vacations. And if we had not found out...they would have taken the bonuses and vacations with Government money that was supposed to save them from bankruptcy!
It's close to a MILLION dollars, not BILLION.
Also, he's DONATING THAT MONEY.
My congratulations on winning the name calling award. I will check the number and change that. As for the name you called me, perhaps a look in the mirror or a re-read might help you out. He's donating 'some" of the money, and even though he's not doing so for tax purposes, last I checked the box, donations do get tax breaks. Thanks for the witty comment. I saw those figures and was blown away.
Then I paused and thought "WAIT A MINUTE. What kind of shady games are being played here?"
Normal salary is subject to social security and medicare taxes, while bonuses for the most part are nor. So that means this guy was getting paid 3/4 of a million dollars and paying ZERO into SSI or medicare. Also, bonuses are treated differently for purposes of calculating income taxes on both the state and federal level (particularly when it comes to paying unemployment taxes). So this guy was avoiding paying unemployment taxes and getting special allowances in other areas as well.
Meanwhile, by paying him is "salary" as a bonus, AIG avoids paying into Social Security and medicare as well, as it would otherwise be required to do. It is also avoiding some unemployment taxes as well.
Basically, the greater issue isn't if taxpayer money was used to pay these bonuses, but whether or not these bonuses are legalized tax evasion!
Obama, how about you a millionaire work for one dollar a year like the people in that evil corporation AIG- sacrifice by example-Obama. President this is your chance opportunity to lead by example or just be A HYPOCRITE!
Oh, I get it, he'll work for the $1 dollar as long as you give him three quarters of a million dollars in bonuses from last year. Of course I'm sure he had a nice healthy multi-million dollar salary LAST year, but maybe he has already burned through that what with sending children to colleges and making payments on the vacation homes the yacht, his wife's botox "medical" treatments and his mistresses' Manhattan apartment and silicone enhancements.
I feel so sorry for his pain. At least he still has his Beamer, the Mercedes and the Jaguar.
Hey, comrade Bill. here are the names of democrart crooks who ran Fannie and Freedie. Barney Frank, Chris Dodd, Franklyn Raines, Jamie Gorelik, Rahm Emnauet.
Raines took a 90 million dollar bonus with him when he was forced out after he bankrupted Fannie Mae. Gorelik- stole 30 million, Barney Franks lover took with him a ton of money-bonus when this crook fled.
Fannie Mae reported a loss of $59 million for 2008, and he has requested another 15 billion from the treasury.
Freddie mac reported a loss of 50 billion-2008, requesting 31 billion more. Michael Williams-democrat- VP, FANNIE MAE,Washington based- got a $610,000 retention bonus, on top of his $675,000 salary. run a government company that looses billions and you get a bonus? WOW.
Fannie and Freddie were started by democrats, protected by democrats, funded by democrats, these two massively failed corrupt government entities were put in place by their paid "Hacks" in the democrat party. These two political corrupt democrat run agencies are the reason we are in the financial mess we are in. These two corrupt agencies are the reason for all the toxic sub- prime mortgages that infected the mortgage collapse.
These are the evil rich crooks who should be in prison- But lets get those AIG people, that is what the guilty democrat political crooks-yell-! It's like when OJ said I am now going to look for the real killers.
Bill, fan and fred democrat crooks are due to take millions in new bonuses- Will ACORN- Obama-marxist, show up at their homes?
I said noting about storming anyone's home or getting anyone's kids. Those thoughts sprang from your mind, not mine.
I'm an American. That means I have every right to exercise my freedom of speech by talking about what has happened and how I see it as wrong.
Stick your Communist crap back in your tail-pipe.
Employees with those contracts agreed to a $1 salary on the contingency that they would receive bonuses for compensation. Typically, they would have had a hefty salary with a big bonus on top of that. They were also retention payments. Not everyone from AIG was responsible for what happened with the company. I'm not saying that all the employees deserved bonuses since it's not far to retain employees who ran the company down to start with. Also, bonuses are still subject to taxes since they are income. Please keep in mind that under the Emergency Economic Stabilization Act the companies receiving government funding in the bailout can only deduct $500,000 for each bonus to top executives for tax purposes. (It is $1 million for all other companies.) Anything over the $500,000 is fully taxable at the corporate level.
Fannie and Freddie were not responsible for creating sub-prime mortgages. This is a common misconception. They bought up mortgages and pooled them into mortgage-backed securities. Many of them were rated AA or AAA. Sub-prime mortgages are a direct result of the Community Reinvestment Act which is a banking law. It may be something worth looking up if you haven't checked it or heard of it.
I personally feel some people making judgments or threats need to do some fact-checking first.
Really? Because my pay stub always shows a deduction for NJ unemployment. And every employer I ever had always deducted this from my check. So I'm not sure what you are talking about?
The Federal Unemployment Tax Act (FUTA), with state unemployment systems, provides for payments of unemployment compensation to workers who have lost their jobs. Most employers pay both federal and state unemployment tax.
Taken from http://www.onlinepayrollguide.com/guide/010110.html
Federal Unemployment Tax
The Federal Unemployment Tax Act (FUTA), with state unemployment systems, provides for payments of unemployment compensation to workers who have lost their jobs. Most employers pay both a Federal and a state unemployment tax. A list of state unemployment tax agencies, including addresses and phone numbers, is available in Publication 926, Household Employer's Tax Guide. Only the employer pays FUTA tax; it is not deducted from the employee's wages. For more information, refer to the Instructions for Form 940.
Why do you feel $250,000 is too high a salary to pay anyone? Is it because they haven’t developed knowledge and skill that the rest of us don’t have? Is it because they have provided services that anyone else can do just as effectively? Is it because that they will not spend all of it but rather invest it for their families future? Why is it that you feel no one does enough to deserve to earn $250,000?
I wonder when the last time or even you made a public protest against all the union professional athletes, I wonder if you made that complaint each time or even one time to your doctor, I wonder it have made public protests about all the entertainers, I wonder if you have gone to a person/family that has created a business investing all their time and moneys that employs many people, or is just what the Senator Dodd, Congresswoman Pelosi, and President Obama whine about that you whine about.
Living in Michigan, I use GM and the UAW for setting the stand for pay. Last year that standard was $86,000 plus benefits for the job cleaning up offices. I must say that I believe for the sacrifice that my doctor made to gain the knowledge and skills that helps keep me able to have the quality of life I am able to he should earn more than 3 times that standard, he is providing that knowledge to help hundreds more.
Why is it that when people earn their money legally it is always too much and yet when politicians such as Charley Rangel, or Tim Geithner don’t pay their taxes it doesn’t seem to be a big concern? The guys at AIG seem to get more public ridicule than the guys that create the Ponzi schemes (save Madoff, but that took claims of $50billion)?
I actually have sympathy for this guy at AIG. At his age he came face to face with the political reality. The vast majority of politicians in DC (Mr. Liddy included) don’t care about accountability, or responsibility, or the rule of law. They only care about self interest and getting on good side of the media (which means face time).
I am surprised that it was AIG that cause the economy downturn. I heard all last fall that it was Bush, and the subprime mortages and housing. More recently I have heard it had to to with some accounting changes. Even this past week Prsident Obama was syaing that their were many things and the current situation was building for more than a decade.
I have worked for some large employers and some very small, and I was so focused on what I was doing that outside of my activities I had little contact with other functions. And if what I have heard is true that these loan swaps were being developed and managed in Europe than it seems credible that this guy and his people trusted that all others working in a similar manner and taking simlar risks.
It seems in light of the threats to AIG employees and the eagerness of AG Cuomo to publish the names and address of those recieving bonus of having your name published would be upset and willing to get out with some diginity.