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AIG CEO's Stake In Goldman Raises Conflict Of Interest Questions

4875596Edward M. Liddy, chief executive of beleaguered insurance giant AIG, holds a $3 million stake in Goldman Sachs, presenting a possible conflict of interest regarding use of taxpayer dollars, according to a New York Times report Friday.

AIG has spent billions in federal bailout funds to repay its trading partners, including Goldman, which received $13 billion from the insurance company. Liddy's stake in Goldman comes from the time he served on its board of directors and audit committee, before taking AIG's helm at the request of former Treasury Secretary Henry Paulson, himself a former Goldman executive.

The disclosure of Liddy's holdings, which came in Goldman's proxy statement, raises questions about whether AIG's use of taxpayer money to insulate business partners from its rapidly decreasing value was appropriate. As the Times points out, had AIG declared bankruptcy, as it might have without the government stepping in to take an 80 percent ownership stake, its trading partners would have been forced to fight in court for their claims. In that case, they likely would have gotten pennies on the dollar.

Christina Pretto, a spokeswoman for AIG, told the Times that Liddy's stake in Goldman had no bearing on AIG's decision to channel bailout funds to the bank, saying that those decisions were made by the Federal Reserve Bank of New York.

Liddy, who is receiving $1 a year in his role overseeing the orderly dismantling of AIG, holds $2.2 million in restricted Goldman shares. The remainder of the $3 million is in common stock.

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