Beyond Structured Settlements

NSSTA 2008 Fall Meeting - 2

S2KM's prior blog post about the NSSTA 2008 Fall Meeting (NSSTA 2008 Fall Meeting-1) highlights the advancing age of NSSTA's leaders and conference attendees; and also recommends that NSSTA's current leaders focus on transitional industry leadership.

This S2KM blog post speaks to the next generation of structured settlement leaders.

Until the U.S. government bailout, AIG's structured settlement program defined the claim management approach to structured settlements.

AIG's structured settlement program had everything to do with AIG and much less to do with injury victims. AIG's structured settlement program featured:

• AIG products;
• AIG agents;
• AIG approved lists and settlement documents;
• AIG's rights to final refusals;
• AIG's "sharing" of injury victims' tax benefits; and
• AIG's policies opposing 468B funds and feigning ignorance (actually exhibiting ignorance) about settlement transfers.

AIG's structured settlement program, as it existed prior to the U.S. government bailout of AIG, is history.  So, also, in S2KM's opinion, is the claim management structured settlement business model AIG represented, promulgated and perfected.

The future of structured settlements focuses on injury victims and their attorneys - both personal injury trial attorneys and settlement planning attorneys - as well as judges, mediators, guardians, trustees, and government benefit regulators.

The new profession is called "settlement planning". Structured settlements represent a strategic settlement planning product.

On October 8, 2008 (less than 3 weeks ago), AIG Chairman Edward Liddy stated in a letter to U.S. Treasury Secretary Henry Paulson: "we owe our employees and the American public new standards and approaches." Liddy was responding to reports of outrageous business conduct by AIG executives and agents following the government bailout - a sorry AIG culture that now receives ongoing public revelations and deserved criticism.

Why shouldn't Liddy's confession of AIG's failed business standards and approaches be applied to AIG's structured settlement program and business model?

Why shouldn't the leaders of the structured settlement industry utilize the AIG debacle to re-examine the most fundamental components of their own claim management business model - as represented by AIG and others?

Are current structured settlement leaders, who have supported AIG and participated in AIG's structured settlement program and business model, capable and appropriate leaders for defining and promoting "new standards and approaches" for structured settlements?

Where is the next generation of structured settlement leaders?

As new leaders, are you capable of articulating and building new structured settlement standards and approaches? How do your new standards and approaches improve and grow the structured settlement market?

S2KM will continue this discussion in subsequent blog posts.

NSSTA 2008 Fall Meeting - 1

The National Structured Settlement Trade Association (NSSTA) hosted its 2008 Fall Regional Meeting at the Grand Hyatt Hotel in San Francisco from October 22-24.

Other structured settlement bloggers, including Mark Wahlstrom of the Legal Broadcast Network, have already published online reports about the NSSTA Fall meeting.  Like Mark, S2KM's blog author, Patrick Hindert, is an associate NSSTA member. Unlike Mark, this author did not attend any of NSSTA's educational programs.

S2KM did attend four NSSTA committee meetings and the NSSTA opening reception. NSSTA appropriately restricts information sharing from NSSTA committee meetings. This S2KM blog post offers S2KM's general 2008 observations about NSSTA as well as recommendations for NSSTA to consider in 2009. Additional S2KM blog posts about NSSTA will follow.

As Mark Wahlstrom reports, there was a testiness at the NSSTA 2008 Fall meeting. Mark characterizes NSSTA's mood as "fear and loathing" with an acknowledgement to the late Hunter S. Thompson. 

Part of Mark's characterization might result from the age of NSSTA's leadership. In 20 plus years of attending NSSTA meetings, this author cannot remember an older group of NSSTA conference attendees. The entire generation of NSSTA leadership is fast approaching retirement. They represent the history, not the future, of structured settlements.

Part of Mark's characterization might result from appropriate industry concerns about the financial strength of AIG and other structured settlement annuity providers.  For a "bullish" report on the structured settlement industry, see the comments of Jack Meligan and Michael Upchurch in S2KM's blog report about the NASP 2008 Annual Meeting.  See also: S2KM's AIG structured settlement wiki.

For NSSTA and the structured settlement industry to survive and grow, the best of NSSTA's current leadership should proactively assume a transitional leadership role.  Transitional leadership responsibilities should include:

• Strategically analyzing the current structured settlement market - as opposed to living historically in the old (circa 1986) structured settlement market.
• Identifying and engaging the leading settlement planning knowledge experts (many of whom are not NSSTA members) in strategic and public conversations about the future of structured settlements.
• Recruiting and empowering a new generation of structured settlement and settlement planning leaders within a new business model (settlement planning) as opposed to the dying structured settlement business model (claim management).

Based upon this author's limited participation in the NSSTA 2008 Fall meeting, NSSTA's leaders still don't understand or address the strategic issues impacting their industry.  These strategic issues and priorities include:

• Understanding the differences between a claim management structured settlement business model and a settlement planning structured settlement business model;
• Understanding how IRC section 5891 and the 46 state protection statutes have changed structured settlements and organizing a positive and proactive strategic industry response;
• Identifying and addressing the legislative and regulatory changes needed to effectively integrate structured settlements with special needs trusts and Medicare set-aside arrangements;
• Planning whether, how and when the structured settlement industry will transition its knowledge and processes into Internet-based platforms, tools and resources.

For additional S2KM reports about NSSTA, see S2KM's structured settlement wiki and upcoming S2KM blog posts.

NASP 2008 Annual Meeting - 3

Prior S2KM blog posts about the NASP 2008 Annual Meeting:

• NASP 2008 Annual Meeting - 1
  • Summarizes the NASP presentations which S2KM attended;
  • Highlights the questions S2KM addressed to NASP's structured settlement panel.
• NASP 2008 Annual Meeting - 2
  • Re-introduces the NASP structured settlement panelists;
  • Re-confirms the panel structured settlement topic;
  • Provides links to recommended learning resources;
  • Outlines S2KM's summary format;
  • Highlights the underlying issues.

This S2KM blog post summarizes, from the moderator's perspective and notes, the structured settlement panel discussion titled "How to Improve and Grow the Structured Settlement Market" which occurred October 24, 2008 at the NASP 2008 Annual Meeting.

The NASP structured settlement panel featured:

• Jack Meligan, President of Settlement Professionals, Inc.;
• Michael Upchurch, President of Delta Settlement Solutions; and
• Matthew Bracy, General Counsel of Settlement Capital Corporation.

S2KM's Panel Discussion Summary

Issue 1: Are settlement transfers (as defined by IRC 5891 and the state protection statutes) good or bad for the structured settlement industry?

As settlement planners, both Meligan and Upchurch described their view of the secondary market as a "mixed-bag" of bad and good. The "bad" part of factoring results from non-professional ("cash now") advertisements promoted by many factoring companies.  Such advertisements (characterized as "Jerry Springer-type" commercials) are unprofessional and damage settlement planners' relationships with plaintiff attorneys and reduce structured settlement sales.

Not only do plaintiff attorneys dislike "cash now" advertisements, they are also less likely to recommend structured settlements if they believe their clients will eventually sell their payment rights. They recognize and disapprove of the temptations created by such advertising. Meligan and Upchurch both predicted continued negativity toward the secondary market from the primary market so long as factoring companies continue such advertising.

The potential liquidity provided by settlement transfers, however, improves the structured settlement annuity product. Lives change. Unexpected events occur. Even the best personal injury settlement plans need to be reviewed post-settlement and sometimes adjusted. Settlement transfers, which must be reviewed and approved by state judges, are appropriate in some cases.

Many of the problems requiring settlement transfers result from high-pressure sales and over-structuring by defense brokers. Whenever factoring companies receive a serious transfer inquiry from a structured settlement recipient, Upchurch and Meligan urged factoring companies to recommend contacting a settlement planner.  Settlement planners can help advise structured settlement recipients about alternative financial options and strategies.

Settlement planners have a choice whether or not to seek compensation for post-settlement transfer advice to existing structured settlement recipients.  The decision may depend upon whether the settlement planner was the agent of record for the original structured settlement annuity purchase.  In most states, compensation options for settlement planners include fees for serving as "independent financial advisors" in settlement transfer cases.

Summarizing the secondary market perspective, Bracy highlighted the "symbiotic relationship" between the primary and secondary market resulting from IRC 5891 and the state structured settlement protection statutes. Bracy emphasized the need for well-educated plaintiffs and plaintiff attorneys - as well as judges. He noted that many primary market participants have ignored the settlement transfer business.  Bracy acknowledged that good and bad business practices exist in the secondary market as well as the primary market. According to Bracy, the potential secondary structured settlement represents between 5% and 7% of the total primary market.  Most structured settlement cases neither require nor qualify for a settlement transfer.

Members of the audience, primarily settlement transfer attorneys and factoring executives, supported Bracy's viewpoint. More than one attorney echoed Bracy's observation that primary market participants have failed to communicate with their customers post-settlement. Why should the primary market complain when they fail to positively and proactively address their customers' financial needs post-settlement?  Another attorney criticized the primary market generally for its continuing vilification of the secondary market. Still another stated that only the criticisms and bad results get publicized - while the thousands of successful settlement transfers and satisfied secondary market customers are ignored.

Issue 2: What is the future of the structured settlements industry?

Despite the current financial crisis, both Meligan and Upchurch said they are "bullish" about the future of the structured settlement industry. They each expressed confidence in the overall financial strength of the structured settlement annuity providers. They predicted a "Golden Age" for structured settlements based upon a settlement planning model as opposed to the traditional claim management model. Bracy summarized how the current capital markets are hurting both the secondary and the primary markets. As one result of the tight capital markets, he predicted higher discount rates for settlement transfers in the immediate future.

Issue 3: How can the primary and secondary structured settlement markets collaborate to improve and grow the structured settlement market?

Both Meligan and Upchurch emphasized:

• Secondary market companies must stop non-professional ("cash now") advertising.  Note: one factoring company executive stated privately that he plans to review his company's advertising based upon comments by Meligan and Upchurch.
• Plaintiff attorneys and injury victims must be represented by settlement planners including  representation for secondary market issues and options.

All panelists thought continuing communication between the primary and secondary markets would be positive for the future of the structured settlement industry. To grow the structured settlement market, primary and secondary market leaders need to cooperate.  One panelist mentioned Medicare and Medicaid rules as collaboration opportunities. The panelists agreed upon the need to develop best practices for both the primary and secondary structured settlement markets.

For additional S2KM reporting about NASP, see S2KM's structured settlement wiki.

NASP 2008 Annual Meeting - 2

S2KM's prior NASP 2008 blog post (NASP 2008 Annual Meeting - 1):

• Summarizes the NASP presentations which S2KM attended;
• Highlights the questions S2KM addressed to NASP's structured settlement panel.

This S2KM blog post:

• Re-introduces the NASP structured settlement panelists;
• Re-confirms the panel structured settlement topic;
• Provides links to recommended learning resources;
• Outlines S2KM's summary format;
• Highlights the underlying issues.

S2KM's next NAMSAP 2008 blog post will summarize the panel's responses to:

• S2KM's questions; and
• Questions and comments from NASP attendees.

The NASP structured settlement panelists:

• Jack Meligan, President of Settlement Professionals, Inc.;
• Michael Upchurch, President of Delta Settlement Solutions; and
• Matthew Bracy, General Counsel of Settlement Capital Corporation.

Panel topic: How to Improve and Grow the Structured Settlement Market

Recommended S2KM resources:

• S2KM blog series titled "How to Grow the Structured Settlement Market"
• Additional S2KM blog posts
  • NASP 2007 Annual Meeting - 3 posts
  • 2006 NASP Annual Meeting - multiple posts including
    • Overview of the Structured Settlement Market
    • How the Primary Market Views Factoring
  • Structured Settlement Thought Leadership Conference
  • Fresno County Factoring Cases - see Pullman & Comley Structured Settlement Insights - 2
• S2KM public wikis
  • Structured settlement wiki
  • Structured settlement public policy wiki
  • AIG structured settlement wiki
  • Web 2.0 for lawyers wiki
    

In addition, for those readers interested in a more detailed review of the secondary structured settlement market from a legal perspective: see hardcopy "Structured Settlements and Periodic Payment Judgments" (S2P2J). Co-authored by Daniel Hindert, Joseph Dehner and this author, S2P2J includes Chapter 16 titled "Transfers of Structured Settlement Payment Rights". S2P2J Release 44 will be available in December 2008.

Summary format - S2KM's third 2008 NASP blog post:

• will not attempt to summarize individual panel member responses to specific questions;
• will summarize, from the moderator's perspective and notes, the conversation that took place between moderator, panelists and audience.

Underlying issues - The NASP structured settlement panel topic prioritizes three issues:

• Are settlement transfers (IRC 5891 and the state protection statutes) good or bad for the structured settlement industry?
• What is the future of the structured settlements industry?
• How can the primary and secondary structured settlement markets collaborate to improve and grow the structured settlement market?

NASP 2008 Annual Meeting - 1

S2KM attended portions of two professional association meetings this week:

• National Structured Settlement Trade Association (NSSTA) in San Francisco; and
• National Association of Settlement Purchasers (NASP) in Las Vegas.

The NASP meeting was attended by 110 attorneys and factoring company executives. In addition to two state judges, the outside speakers included:

• Samuel Crump - Crump, an Arizona state legislator and former legislative counsel for the California state judges, spoke about the importance of NASP involvement in state legislative issues and basic strategies to achieve positive political results.
• Robert Wood - Wood, a leading settlement planning tax attorney and author, summarized the "Top Ten 2008 Tax Developments Affecting Litigation Recoveries"
• Structured Settlement Panel - This author moderated a panel discussion titled "How to Improve and Grow the Structured Settlement Market". Participants included:
  • Jack Meligan, President of Settlement Professionals, Inc.; 
  • Michael Upchurch, President of Delta Settlement Solutions; and
  • Matthew Bracy, General Counsel of Settlement Capital Corporation.

This S2KM blog post highlights the questions addressed by the NASP structured settlement panelists. Subsequent S2KM blog posts will summarize the NASP panel discussion and discuss the NSSTA conference.

"How to Improve and Grow the Structured Settlement Market" - Questions:

• How have your professional careers helped to improve and grow the structured settlement market?
• Who are your clients and what are their attitudes toward: structured settlements? settlement ttransfers?
• What are the primary reasons some plaintiff attorneys and injury victims reject structured settlements?
• What opportunities and strategies exist for the primary market to grow the structured settlement market?
• What primary market strategies and business conduct have hurt the growth of the structured settlement industry?
• How have IRC section 5891 and the state structured settlement protection statutes impacted your business?
• Have these legislative changes been good or bad for the structured settlement industry?
• When you advise plaintiff attorneys and injury victims about structured settlements, what do you tell them about the secondary market?
• Do injury victims or plaintiff attorneys ever contact you post-settlement to discuss settlement transfers? If yes, what are your questions and advice?
• Should the primary structured settlement market be subject to the same legal requirements as the secondary market? Examples: disclosure and judicial approval.
• What impact is the current financial crisis having on the structured market and, more specifically, on your own business?
• What will be the long term impact of the current financial crisis on the structured settlement industry?
• Do you and your clients gain any reassurance from the fact that some NASP members continue to purchase annuities issued by all current NSSTA annuity providers including AIG ?
• Should structured settlement annuity recipients be concerned about the financial viability of structured settlement annuity providers?
• Should any such financial concerns qualify for "best interest" consideration under state structured settlement protection statutes?
• Which business practices of factoring companies are most harmful to the primary structured settlement market?
• Which issues raised by the Fresno County Factoring Cases are most important for the primary and secondary structured settlement markets?
• Does the secondary market help or hurt the growth of structured settlements used to fund settlement trusts including special needs trusts and Medicare set-aside arrangements?
• How can NASP help to improve and grow the structured settlement market?

For prior S2KM blog posts about NASP and NSSTA, see S2KM's Structured Settlement Wiki.

Historical Structured Settlement Annuity Premium

S2KM has added an historical summary of structured settlement annuity premium to its public structured settlement wiki using "Structured Settlements and Periodic Payment Judgments" footnote 1 Section 1.03 as its source document.

AIG Structured Settlement Wiki

Important AIG developments continue on a daily basis. For structured settlement stakeholders who are attempting to monitor AIG developments, S2KM has created and continues to update this AIG Structured Settlement Wiki including this AIG Structured Settlement Timeline.

Special Needs Trusts X

Stetson Law School hosted the 10th Annual Special Needs Trust (SNT) Conference October 16-17, 2008 at the Don CeSar Beach Resort in St. Pete Beach, Florida. More than 300 attorneys, trustees, care planners and structured settlement consultants attended one or both of the basic and advanced educational programs.

Throughout its 10 year history, the Stetson Conference has been recognized as the leading SNT knowledge forum in the United States. Most of the speakers are members of either the Academy of Special Needs Planners (ASNP) or the Special Needs Alliance (SNA) and each of these associations schedule members-only meetings in conjunction with the Stetson Conference.

For structured settlement professionals, the Stetson program titled "The Basics of Special Needs Trusts" offered analyses of several important settlement planning topics and included two presentations specifically focusing on structured settlements:

• Texas Attorney Pi-Yi Mayo spoke about the January 31, 2006 Social Security Administration (SSA) letters to attorneys Roger Bernstein and Jay Sangerman ("Bernstein letter") as well as the application of the Deficit Reduction Act of 2005 (DRA) to structured settlements used to fund special needs trusts; and
• Leo Govoni, Director of the Center for Special Needs Trust Administration, provided "An Economic Analysis of Structured Settlements".

In addition, Bradley Frigon ("Basics of Special Needs Trusts") and Bernard Krooks ("Taxation of Special Needs Trusts") each addressed structured settlement issues in their conference presentations.

Mayo's discussion about the Bernstein letter and the DRA highlighted two controversial issues that have not received sufficient attention by either the National Structured Settlement Trade Association (NSSTA) or the Society of Settlement Planners (SSP). For backgound about these issues, see these prior S2KM blog posts:

• The Deficit Reduction Act of 2005
• Inconvenient Questions - summarizing a paper by Sylvius von Saucken.
• SSP 2008 Annual Meeting - 2: specifically David Lillesand's comments that the SSA letters to Bernstein and Sangerman are "inoperative" based upon his discussions with SSA officials including Ken Brown.
• NSSTA 2007 Winter Meeting - 3: specifically Jay Sangerman's statement that the DRA "does not apply to structured settlements" used to fund special needs trusts.

Citing Texas law, Mayo stated that the DRA annuity rules do apply to structured settlements used to fund SNTs - at least in Texas. According to Mayo, the Texas interpretations of the DRA are especially relevant because the DRA annuity rules adopted pre-existing Texas rules almost verbatim. Mayo warned that other states are likely to interpret the DRA annuity rules in a similar fashion - especially because (as other Stetson speakers confirmed): 1) state Medicaid agencies are making a concerted effort to limit SNT uses, flexibility and availability; and 2) many state Medicaid agencies continue to view annuities generally as abusive SNT planning techniques.

As a counterpoint on the DRA, Mayo recommended John Campbell's 2008 NAELA Journal article titled "The Use of Qualified Settlement Funds, Qualified Assignments and Special Needs Trusts in Physical Injury Settlements" in which Campbell argues that the DRA should not apply to structured settlements used to fund a SNT because the funds used to purchase the structured settlement annuities never belong to the SNT beneficiary. For S2KM's review and analysis of Campbell's article, see S2KM's earlier blog posts titled "IRC 468B Funds Revisited" featuring comments by Campbell.
 
As for the SSA's letters to Bernstein and Sangerman, Mayo did not directly address whether he supported Lillesand's assertion that the letters are "inoperative". Instead he cited the following authority to support his opinion that: 1) payments from a structured settlement annuity that are irrevocably assigned to a SNT are not income to the trust beneficiary when paid directly into the trust; and 2) that such annuity payments paid into a SNT after a beneficiary reaches age 65 should be treated the same as annuity payments received before age 65:

• POMS SI 01120.201J.1D which states in part: "a legally assignable payment ... that is assigned to a [SNT] is income for SSI purposes unless the assignment is irrevocable"; and
• CMS' position that additions to a SNT made after the beneficiary reaches age 65 should not be treated differently from prior additions where there has been an irrevocable assignment of structured settlement payments to a properly established SNT.

Mayo emphasized the importance of reciting the irrevocable nature of the structured settlement assignment in settlement documentation and court orders establishing the SNT.  He also agreed with Lillesand about the importance of obtaining SSA POMS that specifically address structured settlements used to fund SNTs. For S2KM's most recent status report about SSA POMS for structured settlements, see Ken Brown's comments under "SSI Rules for Trust Administration" in S2KM's blog post about the 2008 ASNP Annual Meeting.

In the context of the current financial crisis, Govoni's presentation titled "An Economic Analysis of Structured Settlements" appeared to be an important and timely subject. For this author, however, the analysis fell short of expectations for several reasons:

• Govoni was the only presenter at the conference who did not provide handout materials. With some exceptions, in this author's experience, structured settlement handout materials at national conferences repeatedly fall below the highest standards of other settlement planning professionals.
• Although Govoni briefly referenced the current financial crisis, he did not mention AIG, did not discuss financial ratings and did not address the impact of the financial crisis on structured settlements and/or managed assets as funding alternatives for SNTs.
• Govoni focused much of his analysis on relative rates of return and age ratings but never mentioned after-tax investment comparisons or Monte Carlo analysis.
  
• Govoni recommended annuity commutation riders as a strategy to pay potential estate tax obligations but failed to mention the secondary market as a potential source of structured settlement liquidity.

With the exception of a single reference by Mayo to "the grey market", none of speakers who addressed structured settlements discussed the secondary market, IRC 5891 or the 46 state structured settlement protection statutes. This educational neglect mirrors the continuing failure of NSSTA and SSP to educate their members about how to sell structured settlements (and grow the structured settlement market) in the context of IRC 5891 and the 46 state structured settlement protection statutes.

In this author's private discussions with Stetson conference attendees, several mentioned the secondary market as a valuable settlement planning resource. Three attendees informed this author of SNT beneficiaries and trustees who had been forced into the secondary market almost immediately following settlement because their SNTs had been "over-structured". In each instance, the settlement plan contained insufficient cash to permit the SNT trustee to purchase a needed house and/or a vehicle. In one case, the SNT beneficiary and his family have brought a lawsuit against the plaintiff attorney. These attendees each said the over-structuring resulted from defense pressure during settlement negotiations and could have been avoided if a 468B Qualified Settlement Fund had been utilized.

While it was encouraging to see leaders from both NSSTA and SSP attend the Stetson SNT seminar, more educational interaction and legislative collaboration is needed between the structured settlement industry (both the primary and secondary markets) and related professional associations including special needs planners and Medicare set-aide professionals. As NSSTA and the National Association of Settlement Planners (NASP) prepare for their association meetings next week in San Francisco and Las Vegas respectively, such increased interaction and collaboration should represent priorities and opportunities to improve and grow the structured settlement market.

Congratulations to Stetson Law School for continuing its SNT educational leadership and also for focusing increased attention on structured settlement issues that impact SNTs and special needs planning.

AIG Knew About Valuation Problems

Despite denials by former AIG CEO Martin Sullivan last week before a Congressional subcommittee, a Wall Street Journal article (subscription required) published this weekend offers evidence that top AIG officials knew about problems in valuing derivative contracts as early as October 2007.

During his October 7, 2008 testimony, Sullivan stated he truly believed what he told AIG investors on December 5, 2007: "that AIG has accurately identified all areas of exposure to the U.S. residential-housing market; ...we are confident of our marks and the reasonableness of our valuation methods".

Criminal prosecutors are currently investigating whether AIG executives misled AIG's outside auditor and AIG investors about the value of its derivatives.

The WSJ article reports that Joseph St. Denis, a former AIG internal auditor who resigned October 1, 2007, has written a letter of the House Committee on Oversight and Government Reform stating that he learned in early September 2007 that AIG Financial Products had been asked by its trading partners for billions of dollars of collateral related to AIG derivatives. In his letter to Congress, Mr. St. Denis stated the valuation model of one of AIG's trading partners indicated AIG Financial Partners "was in a potentially material liability position."

Another reason for his resignation, according to Mr. St. Denis, were statements made to him by Joseph Cassano, CEO of AIG Financial Products, that Cassano had "deliberately excluded" Mr. St. Denis from evaluating the AIG derivatives "because [Cassano] was concerned that [St. Denis] would pollute the process."

In his letter to Congress, Mr. St. Denis claims that later in October 2007, following his resignation, he told AIG's chief auditor, Michael Roemer, why he had resigned and Roemer said he would report those reasons to AIG's audit committee.

In addition, in November 2007, the WSJ article reports AIG's external auditor, PricewaterhouseCoopers, told Mr. Sullivan, then AIG's CEO and Steven Bensinger, AIG's Chief Financial Officer, that "it believed that AIG could have a material weakness" in its risk management according to minutes of an AIG audit committee meeting which were also released to Congress.

In other weekend news about AIG, Senator Max Baucus, Chairman of the Senate Finance Committee and a longtime supporter of structured settlements, wrote to Federal Reserve chairman Ben Bernanke on Friday denouncing AIG's earlier sales retreat in California. Senator Baucus stated: “If AIG was throwing money around for tee times and hot stone massages while begging for Federal Reserve dollars, it’s a scandal and an outrage and heads will roll. I want to know who we can fire and how we can get this misspent money back, and I want both of those things to happen pronto.”

For additional S2KM coverage of AIG, see this AIG Structured Settlement Wiki which features an updated AIG structured settlement timeline.

AIG Weekend Update

It has been a rough week for American International Group (AIG).

Former AIG CEO's Martin J. Sullivan and Robert B. Willumstad faced harsh criticism when they testified on Tuesday before Congress. Legislators focused most of their questions on AIG's investments in complicated investment products that insured mortgaged backed securities. They called Sullivan "despicable" for refusing to forego his multi-million dollar severance bonus and further criticized him for reasuring AIG investors in December 2007 about AIG's financial strength despite internal warnings from AIG auditors. Although invited to participate, former AIG CEO Maurice "Hank" Greenberg was a "no show". Instead, in a written statement to Congress, Greenberg said AIG's downfall was not his fault.

The most extreme Congressional, media and public outrage toward AIG this week, however, attacked the well-documented AIG sales retreat in California that occurred less than a week following the U.S. government's $85 billion bailout. AIG Chairman Edward M. Liddy responded to criticism of the AIG's sales retreat with a letter to Treasury Secretary Henry Paulson stating in part: "we owe our employees and the American public new standards and approaches." Absolutely!

And all of this happened before Wednesday when the Federal Reserve announced it had increased its loan to AIG by $37.8 billion (total: $122.8 billion) to help AIG subsidiaries (including insurance subsidiaries) cover requests from clients to redeem borrowed securities. As the late Senator Everett Dirkson once said: "a billion here and a billion there, and pretty soon you are talking about really money". If he only knew.

If AIG's situation weren't so serious, it would almost be funny. At least that is how Seth Meyers and Amy Poehler of Saturday Night Live report on AIG business conduct at the end of their most recent SNL video "Weekend Update" titled "Oh My God, Are You Really Serious !? !" The Weekend Update video also includes an analysis by SNL financial expert Oscar Rodgers about how to fix the current economic crisis.