This is the bankruptcy case of AIG Financial Products Corp., being heard in the U.S. Bankruptcy Court for the District of Delaware.
AIG Financial Products filed for Chapter 11 on Dec. 14, 2022. AIG FB was established in 1987 and was making billions of dollars trading in capital markets, but in 2008 during the financial crisis, the company incurred tens of billions of dollars in unhedged losses.
Last week, a group of former executives of American International Group Inc., a subsidiary of AIG Financial Products, appeared at a hearing before the Delaware bankruptcy judge presiding over the Chapter 11 plan and objected to any plan that did not provide $500 Million for their Lost Compensation.
The 46 former executives are represented by a team of legal experts comprising of Adam G. Landis, Matthew B. McGuire, and Richard Cobb of Landis Rath & Cobb LLP, Stephen J. Astringer, Steven W. Perlstein, Zachary D. Rosenbaum, Adam M. Lavine, Daniel J. Saval, George Stamatopoulos and Martine B. Forneret of Kobre & Kim LLP and David A. Slossberg and Kristen L. Zaehringer of Hurwitz Sagarin Slossberg & Knuff LLC.
At the first virtual hearing, one of the attorneys for the executives said that any plan that did not include the $500 Million in lost compensation, would be “dead on arrival.”
Counsel for AIG FP rejected the executive’s proposal, telling U.S. Bankruptcy Judge Mary F. Walrath that because of the company’s insolvency, the executives’ claims for $500 million for lost compensation are uncollectible.
However, counsel for the executives argued that their clients are the only non-insider creditor and that they will not vote in favor of the plan.
The other significant claim that AIG FP is confronted with is the $500 million in damages that the former executives are seeking in a separate Connecticut lawsuit. The executives say AIG FP took out $185 million in assets from their deferred compensation plans and that they are entitled to repayment with interest. They are also suing for breach of contract and seeking damages under Connecticut employment.
Counsel for AIG FP, Keith Simon told Judge Mary F. Walrath that under the terms of the executive’s deferred compensation plan, plan obligations are subordinate to any other obligations that AIG FP may have, and that there are no further assets to be set aside for the executives.
Simon told Judge “We have limited assets that are being wasted in litigation that can never be paid,” suggesting that the executives underlying suit and objections to the Chapter 11 plan, are in bad faith.
Counsel for the executives, Steven Perlstein, claimed the terms of the deferred compensation contract say that AIG FP “shall” return any amounts taken from their accounts, plus interest.
The combined legal team for the executives confirmed that they would seek to dismiss the Chapter 11 plan as a bad faith filing that was intended to circumvent their lawsuit with no plans to actually reorganize.
At the hearing, the executives insinuated that AIG FP filed for Chapter 11 protections on the same day as a discovery deadline in their Connecticut state court case, and suggested that the company was not seeking court permission to fund ongoing operations.
The virtual hearing ended with the attorneys for the executives expressing their firm commitment to reject any Chapter 11 plan that did not include their demands, saying their clients are the only debtors with the right to vote on the plan.
