One Rousing Resignation Letter

As if you haven’t heard enough AIG news, Edward Liddy, the CEO of AIG, was sent a 1,500 word resignation letter by soon-to-be-former employee Jake DeSantis, who, like Liddy, accepted a $1 annual salary in return for large bonus payments. DeSantis, of AIG’s Financial Products division, penned a powerful, and quite eloquent, letter claiming Liddy’s actions are unjust and those “in the financial products unit have been betrayed by AIG and are being unfairly persecuted by elected officials.” It is because of this that Santos, and presumably more to follow, is resigning.

DeSantis points to the fact that the blame is on the credit default swap losses and not the financial products division. He swears to keep his $742,006.40 after-tax retention payment because most of those receiving the bonus “have done nothing wrong and guilt is not a motivation to surrender our earnings.”

And though he has refused to surrender the money for which he was contractually bound to receive, he does have generous plans for it. As DeSantis himself points out, “some might argue that members of my profession have been overpaid, and I wouldn’t disagree.” So, instead of keeping all $742,000, he will donate 100% of the effective after-tax proceeds to those suffering from the global economic downturn.

This seems to put us in a difficult situation. Should the American people feel sympathy for DeSantis and others at AIG in his situation or anger over their steadfast refusal to return their taxpayer-derived payments?

Fargo Braces for Red River Breach

Thousands of volunteers have been working for days, filling sand bags and erecting makeshift levees in an attempt to stem the flood waters of the Red River, which lies on the border between Minnesota and North Dakota. The continuing snowfall has not helped matters – the area accumulated three more inches of snow last night and the precipitation continues.

Farther north, in Winnipeg, Manitoba, the Red River has risen 10 feet in three days and is expected to reach 20 feet by late Thursday.

As for North Dakota, eight rivers are currently at flood levels. Even worse, the mammoth Red River is currently 15 feet above flood stage and may surpass the 41.1 foot record set in 1897. Because of this, President Obama declared the state a disaster area.

The U.S. Geological Survey has a Web site devoted to the most significant floods in the U.S. during the 20th century. Because spring is prime time for flooding, a new Web page was launched by the National Weather Service and FEMA to mark National Flood Safety Awareness Week. Alarmingly, a 2008 poll by the Insurance Information Institute found that only 17% of Americans have a flood insurance policy.

A Century of Red River Flooding in Fargo


Fargo, North Dakota - 1897 (Photo: USGS)


Fargo, 1997 (USGS)

Fargo, North Dakota - 1997 (Photo: USGS)


Fargo, North Dakota - 1897 (Photo: USGS)

Fargo, North Dakota - 1897 (Photo: USGS)


Fargo, North Dakota - 1997 (Photo: USGS)

Fargo, North Dakota - 1997 (Photo: USGS)

AIG Execs Finally Do Right

It seems it was too much weight on the conscience of those AIG executives who received undeserved bonuses. Or maybe it was the call from New York Attorney General Andrew Cuomo to each of the 20 executives who received the highest rewards that did it. Either way, 15 of the 20 have paid back their entire bonus. Cuomo stated that approximately $50 million of the $165 million has been returned so far and he expects even more AIG employees will hand over their loot.

Cuomo said he expects to recoup about $80 million, which accounts mostly for the amount paid to American employees. Bonuses paid to non-Americans will be difficult to recoup since it is out of their jurisdiction.

The Treasury Department, citing documents from AIG, said bonuses ranged from $1,000 to nearly $6.5 million for more than 400 employees and future employees. Seven employees received more than $3 million. Awards of $1 million or more were paid to 73 employees, including 11 who no longer work there.

“I applaud the employees who are returning their bonuses,” Cuomo stated late yesterday. “I think they are being responsive to the American people.”

Well done Mr. Cuomo, but are the American people satisfied with an expected return of only half of the total amount paid out?

Live from the 8th Annual Business Continuity & Security Conference

I was lucky enough to attend day one of the 8th annual Business Continuity and Corporate Security conference here in New York City. The two-day event brought together risk professionals and corporate executives from around the U.S. to engage in a series of informational seminars.

Alexander Tabb, of the TABB Group, opened the conference with his presentation on resiliency in the economic recovery and how companies can cope by managing with less. In what was the most engaging presentation of day one, Tabb repeatedly stressed how important it is for companies to establish a specific definition or risk. Various employees throughout an organization may have their own definition of risk, but for risk management to be successful, each and every organization must define their own, specific definition of risk in relation to their operation.

Mr. Tabb then expressed his views on the role of a chief risk officer. “The CRO role is way too much for one person to handle,” Tabb said, explaining his opinion that there should be a risk committee within a company that is composed of, among others, operational, financial and technological risk managers. He felt the CRO solution never achieved its goals and companies are now moving away from the CRO role – at least most of them. “Effective CROs were the exception to the rule and it is highly dependent upon the personality of that chief risk officer.”

The resounding sentiment, not only from Tabb, but from every other conference speaker that day was the notion that risk is going to be a topic for the next five years…at least.

And we will be here to cover it.