Embattled AIG Turns To Crisis Managers

Once-Mighty Insurance Giant Tries To Rescue Image And Weather Public Backlash

(CBS/AP)  They took lavish junkets and paid bonuses to purveyors of exotic financial instruments. Now add this to the list of extras American International Group Inc. has paid for while grasping a federal lifeline: The once-mighty insurance giant has turned to a seasoned Washington crisis manager to repair its tattered reputation and help it weather the escalating public backlash.

Levick Strategic Communications, first tapped by AIG last year, is known for coaching prominent players through the messiest of cases, from the Catholic Church's sex abuse scandal to the controversy surrounding a Dubai-based company's contract to run some U.S. ports. It's a player in a vibrant and lucrative cottage industry in the nation's capital - helping high-profile people and companies rescue their images after well-publicized missteps.

Now, as AIG faces congressional grillings and an enraged public, Levick is on the front lines, dispensing advice to embattled chief Edward Liddy. On Wednesday, Levick crisis adviser Michael W. Robinson was on hand in the packed Capitol Hill hearing room where Liddy was peppered with questions from outraged lawmakers.

AIG hired Levick in June, according to a person with knowledge of the relationship who spoke on condition of anonymity because he was not authorized to divulge the information. Back then AIG was buffeted by a management shake-up, a federal probe and Wall Street downgrades, and its former CEO Maurice R. "Hank" Greenberg had declared the company "in crisis," saying it had lost credibility with investors.

Neither AIG nor Levick would talk about their ties - not surprising, given that crisis communications by definition is highly secretive, with both client and consultant striving to shape public perceptions without leaving fingerprints. AIG spokesman Mark Herr declined to comment, as did Robinson.

People familiar with Levick and the business of crisis public relations estimate that AIG could have paid Levick a retainer of $1 million or more, although such work varies widely in price.

Herr sent The Associated Press a statement explaining that AIG has retained several outside public relations firms to help serve its needs as it restructures. Those companies "are helping to address in as timely a manner as possible the intense internal and external communications demands since AIG's financial crisis began," the statement said. The firms don't lobby, AIG added, and their costs "are vastly offset by cuts in AIG's advertising and sponsorship activities."

In any case, it's not entirely clear whether AIG got its money's worth.

While working with Levick and receiving federal bailout money, AIG spent some $440,000 on a posh retreat for executives at the exclusive St. Regis Resort, Monarch Beach in Dana Point, Calif. Then it went through with an $86,000 partridge-hunting trip in the English countryside. And last week's decision to pay out previously planned bonuses to hundreds of employees, including some in the Financial Products unit whose dealings helped drag the company down, has drawn the predictable share of outrage from the White House to water coolers and kitchen tables around the nation.

Insiders say even the most brilliantly choreographed public relations strategy won't make a dent in public perceptions of a company like AIG unless it reforms itself - and maybe not even then.

"Once the company plays Moses and shows the public how they're going to get out of the wilderness, then they do have a number of options, and a good crisis manager can help figure that out," public relations specialist Eric Dezenhall said.

Better yet, said Paul Argenti, who has worked extensively in public relations for financial services companies, is that they avoid getting into the wilderness in the first place.

"Companies need to understand that if you can solve problems before they happen, you don't get into crisis," said Argenti, who teaches communications and management at Dartmouth University's Tuck School of Business. "They're more than happy to spend a ridiculous amount of money after they get in trouble."

At that point, Argenti added, the most a crisis manager can do is provide tactical advice, like how to testify before a hostile House committee as Liddy did Wednesday. "If you wait until you're in a situation like AIG is in, there's no one on the planet who can help you."

In fact, Levick's executives routinely advise companies to look out for their reputations before crisis hits. In a recent posting on the firm's blog - dubbed "Bulletproof" in an apparent reference to the status they hope to convey on their clients - Robinson singled out Citigroup Inc.'s purchase of a $50 million corporate jet as a perfect example of what a company getting federal bailout money shouldn't do.

"What was once kosher is now taboo. Luxurious and excessive spending is on everyone's radar screen," he wrote. "The sooner that corporate executives come to terms with this new reality, the sooner they will be able to keep their companies out of the headlines and out of trouble with their most vital stakeholders."

But what's good for clients isn't always good for the crisis managers themselves.

In a blog posting Wednesday, company president Richard S. Levick offered financial services companies advice that his own firm was rejecting: "'No comment,"' he wrote, "is akin to uttering, 'We're guilty."'

On Wednesday, it was revealed that Sen. Christopher Dodd, D-Conn., at the urging of the Obama administration, placed a clause in the economic stimulus package that created a loophole on bonuses paid by bailout recipients.

Since no legal restrictions can be placed on bonuses prior to their release, lawmakers rushed to draw up bills in both the House and Senate to impose heavy new taxes on them.

The top two members of the Senate Finance Committee on Tuesday announced a bill that would impose a 35 percent excise tax on the companies paying the bonuses and a 35 percent excise tax on the employees receiving them. The taxes would apply to all companies receiving government bailout money, but they are clearly geared toward AIG.

"I think we're on the path to where at least most of the money is going to be given back," Michael Santoli, associate editor at Barron's, told CBS' The Early Show. "I do think this crescendo of outrage has basically had its effect in that regard."

[chavah5760]

I find it facsinating that Levick Strategic Communications seems to always be there, wherever there is a nasty, vile scandal to be covered up. Enron, 2000 Florida recount, Gunatanamo Bay scandal, Catholic Church sex abuse scandal, now AIG. Why is it then that Baylor University hired Levick to handle the PR for the national study on clergy sexual abuse it published just last month. Was it collusion to keep the study controlled & under wraps???

[joesilver90]

If Mr. Liddy was truly upset about the bonuses that were just paid out, he'd fire the people at AIG who drafted and agreed to the bonus contracts that allegedly can't be broken and are payable despite (1) not being tied to individual performance, (2) not being tied to the company's performance, and (3) not requiring the employees to remain at AIG in order to receive them. In case Mr. Liddy doesn't know the names of the people who drafted and agreed to the contracts, they are: (1) William Dooley (Head of AIG's Financial Services Division and the person who has been responsible for supervising AIG Financial Products for the past ten years - and still remains responsible for supervising AIG Financial Products and many other divisions of AIG despite Fed Chairman Ben Bernanke's recent comment that there was no supervision within AIG of AIG Financial Products), (2) Patricia Skigen (General Counsel of AIG's Financial Services Division and the in-house lawyer who drafted the bonus contracts - despite previously being removed as a partner from her former law firm (Willkie Farr) and then fired from Chase Manhattan Bank), (3) Carol Montgomery (Head of Human Resources for AIG's Financial Services Division when the contracts were entered into), and (4) Anastasia Kelley (AIG's General Counsel - who Mr. Liddy just promoted to Vice Chairman of AIG and Head of Legal, Human Resources and Public Relations despite her endorsement of the unconscionable bonus contracts and despite her approval of the infamous contract between AIG and Joseph Cassano pursuant to which he was paid $1 million per month after being fired from the company). All four of those people are still employed by AIG and received their own Liddy-approved bonuses on March 18th (that are on top of the $164 million in bonuses paid last week to the employees of AIG Financial Products). Until those four people are fired, it's impossible to take Liddy seriously.

[joesilver90]

If Mr. Liddy was truly upset about the bonuses that were just paid out, he'd fire the people at AIG who drafted and agreed to the bonus contracts that allegedly can't be broken and are payable despite (1) not being tied to individual performance, (2) not being tied to the company's performance, and (3) not requiring the employees to remain at AIG in order to receive them. In case Mr. Liddy doesn't know the names of the people who drafted and agreed to the contracts, they are: (1) William Dooley (Head of AIG's Financial Services Division and the person who has been responsible for supervising AIG Financial Products for the past ten years - and still remains responsible for supervising AIG Financial Products and many other divisions of AIG despite Fed Chairman Ben Bernanke's recent comment that there was no supervision within AIG of AIG Financial Products), (2) Patricia Skigen (General Counsel of AIG's Financial Services Division and the in-house lawyer who drafted the bonus contracts - despite previously being removed as a partner from her former law firm and then fired from Chase Manhattan Bank), (3) Carol Montgomery (Head of Human Resources for AIG's Financial Services Division when the contracts were entered into), and (4) Anastasia Kelley (AIG's General Counsel - who Mr. Liddy just promoted to Vice Chairman of AIG and Head of Legal, Human Resources and Public Relations despite her endorsement of the unconscionable bonus contracts). All four of those people are still employed by AIG and received their own Liddy-approved bonuses on March 18th (that are on top of the $164 million in bonuses paid last week to the employees of AIG Financial Products). Until those four people are fired, it's impossible to take Liddy seriously.

[joesilver90]

Amazing

[Solarrays247]

AIG is getting and spending all of this Money, but they won't pay my Clame on LHWCA. I was injured in Kosovo and Iraq fighting for my Country, AIG is fighting to keep from paying my doctors bills or me!!
AIG, I told you that one day you will die and that I would help in digging the hole to dump you in.
Posted by beentheir1 at 10:43 AM : Mar 19, 2009


Sorry to hear about your problem, beentheir1. A good friend of mine was injured in an auto accident late last summer, and her car was totaled. She just told me yesterday that she is still waiting for AIG to finish paying off her claim. According to her, she has begun receiving bills from bill collectors, and these bills should have been taken care of by AIG.

I wonder if AIG will ever be allowed to live all of this down. Look for them to change their corporate name sometime in the future.

[antoniof123]

AIG hired Levick in June

Hey AIG when hire these people it means you are not supposed to keep making the same mistakes.

LOL....I would say the people who got hired didn't get paid enough for the mess that AIG has created for themsleves.

[scb1111_1]

President Obama and the DumboCraps plans to recover the economy! Help the financial instutitions with "bailouts" and then kick the "he11 out" of the company!

[dsnj1-2009]

I think most people are SO disgusted, that no amount of public relations work will help them. Another waste of money-paid to the PR firm, just cut your losses and be done with AIG-will save alot of money!

[scb1111_1]

Lobbyists for AIG admit their "mistake" of giving most of their lobbyist's monies to the DumboCraps than Republicans?

[scb1111_1]

Democrats blame big business for this mess, Republicans blame the President Obama and Congress for this mess? Who is correct? Well, who wrote the Amendment to the Stimulus Bill to exempt these bonuses for these finanacial institutions last month?

[gl84685]

I am so angry at the fact so much money is being tossed around and I can't get enough money to pay down on a vehicle, what were these people thinking about, gried, a very dangerous situation. I bet they were all Republicans
Posted by 122049 at 10:15 AM : Mar 19, 2009
+ report abuse + permalin

Huh, when did the Kenyan Kid and his posse become Republicans?
Their the ones giving money away.

[gl84685]

The bonus issue is a diversionary tactic to take the focus off of the billions AIG received. $165 million is pocket changed compared to the total. Tell the taxpayers what happened to bulk of their money.

[far_point200]

Looks like the new US growth industry is public relations consulting. So instead of using TARP money to pay financial managers to wright sinking financial institutions, PR consultants we'll be hired to guide the institutions to their graves in a politically correct fashion. Hmmmm... I hope the PR consultants don't compensate their employees with bonuses! (They probably entitle bonuses as "Imbecile Tolerance Pay")

[lost_america]

They should have done what my company is doing -- freeze the wages of employees, and cut manager bonus's by 30%...yeah, that's fair.
Posted by Widget101 at 10:26 AM : Mar 19, 2009
+ report abuse + permalink

>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
Scary thing is, in their mind it is fair

When our CIO told us our job was going to India, He stood in fromt of us and told us that this was really a good deal for our compnay.

In his mind he throught that would somehow help us

[lost_america]

Maybe, we should have all those in Congress have their salaries tax 90% too!
Posted by scb1111_1 at 10:14 AM : Mar 19, 2009

>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
only on the bribes and payoffs they receive

[renojmc]

Nothing short of firing all of the top execs who were responsible for creating this horrendous fiasco will suffice.
Posted by art001-2009 at 10:23 AM : Mar 19, 2009
------------

I assume you're referring to Obama, Geithner, and Dodd. They're the ones that allowed it to happen (and then lied about it).

[art001-2009]

"The once-mighty insurance giant has turned to a seasoned Washington crisis manager to repair its tattered reputation and help it weather the escalating public backlash. "
_________________________________________________

Nothing short of firing all of the top execs who were responsible for creating this horrendous fiasco will suffice.

[perceptions5]

rockfish (301 friends, send message) wrote: 6m ago
Well Obama's "enemies list" is getting longer. We need to add another name today:

1. Rush
2. Crammer
3. Cheney
New (4) Mike Krzyewski

---------------------------

so you are saying that if you do not agree with your Messiah that you are now an ENEMY????????

We are still in America right?
======================================

Look all American's can exercise their First Amendment Rights AS LONG as you don't disagree with Obama, aka ........."the one"

And NO you're not in America..............................You're in NAZI America as long as we continue to have a mostly corrupt liberal MSM wolfpack press..........................aka............the Dems "Enabler"

[122049]

Aig, they all must be Reepublicans!! Griedy!

[aztecdakota]

AIG and all that bailout money because they are hurting? Then turning around and giving bonuses to the executives who failed in their jobs and responsibilities, and the corporation is still hurting. AND the US Government is still giving them money. Oh, Oh, Al Capone, you were a Saint compared to these people!!!! Shame , shame, shame on them, and also very dumb!!