NEW YORK: AIG is to freeze about US$19 million (S$28.5 million) in compensation payments to Mr Martin Sullivan, the former chief executive of the stricken insurance group, the Financial Times (FT) reported yesterday.

Mr Andrew Cuomo, the New York Attorney-General, said the group, which was rescued by the US government last month, has also agreed to freeze about US$600 million of deferred compensation and bonuses due to executives of AIG Financial Products, whose losses precipitated the group's collapse.

Mr Joseph Cassano, former head of AIG Financial Products, has a share of about US$69 million of the US$600 million pool, while five others have a combined share of about US$93 million, Mr Cuomo said.

According to the FT report, AIG last week agreed to help recover any improper payments made to senior management as part of an investigation by Mr Cuomo, who said that 'until taxpayers are repaid with interest...no funds should be paid out'.

He has threatened legal action unless AIG stopped 'outrageous' expenditures and helped recover past ones. The freezing of planned payments would help 'stop the haemorrhaging' but the 'more ambitious' goal was to recapture payments already made, said Mr Cuomo, who believes some payments could have violated a New York law.

'The American taxpayer is now supporting AIG, making the preservation of these taxpayer funds a vital obligation and a priority responsibility of your company,' Mr Cuomo wrote in a confirmation letter on Wednesday to Mr Edward Liddy, AIG's current chief executive.

Other firms that take government funds to shore up their finances could also be investigated, Mr Cuomo said, though he declined to name specific companies.

AIG, which now has more than US$120 billion in loans and liquidity lines from the New York Federal Reserve, came under widespread criticism after a congressional oversight hearing revealed that it spent more than US$400,000 on a retreat for insurance agents one week after the bailout.

AIG said in July that it had awarded Mr Sullivan a package worth at least US$47 million. Wednesday's announcement affects about US$19 million in severance payments and bonuses.

An AIG spokesman said the moves to freeze the payments were 'consistent with our discussions with the Attorney-General and the actions we have been taking' to reduce expenses and safeguard capital.

Lawyers for Mr Sullivan and Mr Cassano did not immediately return requests for comment on Wednesday.

This article was first published in The Straits Times on October 24, 2008.