After Using Federal Bailout Money To Award Massive Bonuses, AIG Is Now Using Public Funds to Sue the Government To Get Back $306 millions in Tax Payments Tied to Offshore Tax Havens

200px-aig_wordmarksvgWhile Congress attempts to get back roughly $170 million in bonuses paid to executives at American International Group (AIG), AIG is suing the U.S. government (its largest shareholder) for $306 million in tax payments. Between bailouts, bonuses, and tax refunds, it is getting difficult to tell how has what amount of the public fisc.

AIG wants the government to return of $306 million in tax payments including some tied to its offshore tax havensin the Cayman Islands, Ireland, the Dutch Antilles and other offshore havens. AIG had a reputation for fighting aggressively to prevent having to pay taxes to the country that ultimately bailed it out of its disaster. Presumably, some of the public bailout money is now being used to sue the government for past taxes.

As for the bonuses, the legislation has passed the house. I remain skeptical as I discussed on ABC News last night. While it is true that the court defer greatly to Congress on taxes, the intent to punish these executives was hardly hidden by the sponsors. I was lead counsel in the last successful bill of attainder case (Foretich v. United States in 2003) and I believe that there is considerable merit to a challenge to such a law. To that extent, as Steve Chapman discussed today in his column, I disagree with professors who insist that just framing it as a tax is sufficient to pass judicial review.

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47 thoughts on “After Using Federal Bailout Money To Award Massive Bonuses, AIG Is Now Using Public Funds to Sue the Government To Get Back $306 millions in Tax Payments Tied to Offshore Tax Havens”

  1. Hey Sport’s Fans,

    Great thread; thanks for all the links funny and serious.
    For an example of rare talent check out Lebron James’ Incredible
    underhanded shot!

  2. Here you go Mikes x2 – enjoy…

    “Current and former prosecutors who’ve handled white-collar cases said the defendants’ most common trait was avarice.

    “It doesn’t matter if you graduated from the best schools in the world and had every privilege accorded to you or not,” said Mr. Campbell, a member of the Enron Task Force with degrees from Yale University and the University of Chicago School of Law. “Greed is a strong motivation, and it can cause you to make mistakes.”

    …”People who succeed in corporate America are risk takers,” said Anthony Barkow, a former federal prosecutor and Harvard Law School graduate who is now a New York University Law School professor. “They’re smart, confident and sometimes even arrogant. That’s what it takes to succeed. Risk takers get closer to the line and sometimes cross it.”

    Graduates from top-tier universities may feel so special, they think law doesn’t apply to them, Wharton’s Schweitzer said.

    “We encourage our students to explore and think outside the box,” Mr. Schweitzer said. “In general, this approach is very constructive, but it may prompt people to be less likely to recognize an ethical dilemma.”…

  3. Excellent analogy, Mike. Please don’t apply your analytic skills to the legal profession.

  4. Just a little side thought on all this that I’ve been pondering for awhile. It relates to the supply and demand types who think the market rules all. Think of Alex Rodriguez,
    whether you like him or not is immaterial and I personally don’t like him, but concede he is one of the five best players in baseball. The major leagues have 30 teams and with expanded rosters of 40, about 1,200 players play major league baseball in the course of a year. If you add the Japanese Leagues, which appear to have some talent that is perhaps another 1,000. Add an extra 300 for unrecognized talent and you get about 2,500 people who are the best baseball players in the world.

    Untold countries no play baseball and this includes South America, the Caribbean, China, etc. Almost every American boy has played baseball at one time or another so i would say that it is a conservative estimate to say about 100 million have played baseball worldwide. That means that that 2,500 represents 0.000025 of the potential pool of top level baseball players. If ARod is in the top five then he represent 0.000000005 of the total population. He is the highest paid baseball player and he makes $25 million a year,
    which he deserves given the rarity of his skills.

    Does anyone seriously believe that these crooks in investment banking rate in the 0.000000005 of potential investment bankers? Do they rate in the top 0.000025 of their profession? Lets be charitable and say that they rate in the top 0.1 of their profession due to knowledge. If that is so then even in America with 350 million people, there are 35 million people with comparable abilities. To me that level of competence doesn’t rate the salaries/bonuses being given out and all of them are easily replaceable.

  5. I noticed that also Mike. I think he fell into a trap that many people do–he kept saying it was exciting to be on the cutting edge of these “new deals” :). I’ve met weapon designers who speak the same way. It’s fascinating, interesting, absorbing etc. until, one day, you wake up and remember you have a soul. Other times, people wake up and find nothing. That’s really scary.

  6. Jill, I heard the Partnoy interview. It was excellent. However, I found myself a bit disturbed that this guy is a law professor at the University of San Diego and did not appear to be the least bit concerned about the ethical aspects of his work when he was trading derivatives, despite his understanding at the time that it was all a shell game.

  7. BIL,
    Good to hear your laughter! Rick Santelli is an extortionist. Plain and simple. I dealt directly with him from 1990 to 1996 when he managed Drexel’s futures desk. Look up conniver in the dictionary, his picture is properly displayed.

  8. This is a fascinating interview which helps to understand the economic crisis. It is interesting that there are still people who blame poor people getting houses for the crisis. In fact, this crisis formed at the highest level of govt. and fiancial industries. It is well worth listening to. (from Terry Gross)

    “Years before the current economic crisis, law professor and former Wall Street trader Frank Partnoy was warning about the dangers of risky financial practices.

    In his 1997 book FIASCO: Blood in the Water on Wall Street, Partnoy detailed how derivatives — financial instruments whose value is determined by another security — were being used and abused by big financial firms. Partnoy used his experiences as a derivatives trader at Morgan Stanley to give the book an insider’s perspective. In the preface to FIASCO, Partnoy wrote about the growing influence of derivatives:

    “Derivatives have become the largest market in the world. The size of the derivatives market, estimated at $55 trillion in 1996, is double the value of all U.S. stocks and more than 10 times the entire U.S. national debt. Meanwhile, derivatives losses continue to multiply.”

    Partnoy is a professor at the University of San Diego law school. In addition to FIASCO, he’s the author of Infectious Greed: How Deceit and Risk Corrupted the Financial Markets.

    Partnoy joins Fresh Air to explain derivatives, credit default swaps and how they led to the current financial crisis.”

  9. Buddha:

    I had a buddy in Lafayette, La that had one and I had to take him to the hospital he was in so much pain. I almost had to bitch slap the nurse to get her to do anything. He was doubled over in pain leaning against a wall, I thought he was going to die. In my early 20’s I am pretty sure had the nurse not done something I would now be serving time for assault.

    So I have experienced it vicariously although that is probably about the same as experiencing sex by way of a porn movie. A kidney stone has my healthy respect.

  10. Bron,

    It is indeed. Another way to avoid UTI’s in cats is to feed them a mix of wet and dry food. My vet told me years ago that dry food alone will almost guarantee a UTI. So far, these cats I have now have not had a one. In addition to being a good mixer, it’s healthy for humans too. It helps avoid oxalate kidney stones. Being prone to these, I always have cranberry juice on hand especially since I refuse to give up the coffee. If you’ve never had a kidney stone, that’s a unique pain that I could only wish upon certain members of the Bush Administration. Pun intended.

  11. Buddha:

    I think I remember that cranberry juice is good for the bladder, the acidity cuts down on urinary tract infections. If I remember correctly my uncle, a veteranarian, used to give it to his cats when they would come down with one.

  12. CEJ,

    Thanks for the kind words and the wonderful music. A honky tonk style walking bass line is always appreciated.

  13. Dear Buddha:

    I do hope your “frustrafunkadelic” lifts soon!

    If not please seek a second opinion pronto; because while you’ve
    “Got to look out for yourself” know that you are not alone and are much loved and admired!

  14. Bron,

    No. At this point a little drinking is in order. Everyone knows you should not drink and garden at the same time. I will say I am more empathetic than ever to the frustration at human nature and political shenanigans Jefferson must have felt when he penned those words. The last two weeks have just been brutal to the psyche. My doctor advised a regime of vodka and cranberry before bed. So a toast to Thomas Jefferson! We could sorely use a man of his skills today.

  15. Buddha:

    Planning on doing some gardening? Mr. Jefferson’s Tree appears to be parched.

  16. Bron,

    We may differ on the solution, but we certainly agree on the cause in re TARP and the two idiots. When someone named Bush says “hurry up” it always means “hurry up and bend over”. Although I must admit, I am starting to think torch and pitchfork for real, Canada is looking better all the time. Just less hassle. Or perhaps a small island devoid of TV, internet and politicians. Nice and quiet.

  17. Jill:

    and that is why I am for free markets. the gamblers take their losses or go out of business and healthier companies take up the slack and the tax payer does not pay for any of it. Had Bush and the other 2 idiots not done the TARP I am pretty confident that we would almost be out of this mess and the people that caused it would be the ones paying. The entire “plan” has been to bail out Wall Street “players” so they can keep their jets and homes in the Hamptons.

    Just plain crony capitalism with the tax payers getting cornholed and picking up the tab to boot.

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