PrintDecember 30, 2008
The AIG junket fable
The AIG post-bailout junket was irresistible fodder for both outrage and mockery. But most of what you know about it is wrong.
Largely due to co-host John Stossel -- whom I consider America‘s best journalist -- ABC's 20/20 is my favorite TV news magazine.
Stossel has done more to promote the ideals of free markets and individual freedom than anyone I can think of in the mainstream media. Whether it's questioning the assumptions underlying the belief in catastrophic man-made global warming, asking Ted Turner if convicted insider-trader Michael Milken has done more for humanity than Mother Theresa, or demonstrating the ease with which to start a business in Hong Kong, Stossel's 20/20 is innovative, controversial, and gets it right almost every time.
Not so on last Friday night's edition of 20/20. During the news magazine's annual recap of the year's events, I was surprised and dismayed to see Stossel's co-anchor Elizabeth Vargas parrot the oft-repeated myth that AIG executives wined, dined, and partied to the tune of $440,000 at the posh St. Regis resort in California just a week after AIG received $85 billion in a government bailout (see Vargas‘ voice over at the 3:33 minute mark of the online video "2008 Caught on Tape: Part 6", December 26, 2008 edition found at ).
Even president-elect Barack Obama has chimed in: "In fact, we just found that AIG - a company that got a bailout - just a week after they got help, went on a $400,000 junket. I tell you what. Treasury should demand that money back, and those executives should be fired."
Anyone in the insurance business is familiar with these junkets...and they are completely the opposite of what we have been led to believe by 20/20, Barack Obama, and the press at large.
Some facts:
- the junket was not for AIG executives or AIG employees; it was for independent agents who sold insurance products for a subsidiary of AIG‘s called American General. These agents, in all likelihood, also represent another 5 or 6 insurance companies.
- These independent agents are not employees of AIG but are, as the name implies, independent agents who receive 1099's at the end of the year, not W-2's. Box 7 of those 1099's are checked off indicating that the funds received were "nonemployee compensation."
- American General operates independently from AIG and enjoys a financial status that, unlike its parent company, is healthy, thriving and boasts high ratings separate and apart from its parent company.
- The St. Regis trip is a common incentive type trip that agents compete for in the insurance industry: they have to produce a certain amount of business during a designated time period in order to qualify. Virtually every single life insurance company operating in the United States holds similar contests. See here, here, and here, for examples offered by some of the industry's other insurance companies.
- The St. Regis trip was probably set up 6-12 months prior to its taking place. It was an obligation on the part of AIG's subsidiary to provide these agents with the trip. They earned it. For American General to have reneged on this obligation would have been tantamount to not paying their electricity bill...and jeopardize their financial rating for non-payment of bills.
Both 20/20 and Barack Obama have managed not to let truth get in the way of a good story. However, I suggest they owe the hard-working and successful individuals who attended the St. Regis junket owed to them an apology.
