In March, 2008, the Office of Thrift Supervision wrote AIG, "We are concerned that the corporate oversight of AIG Financial Products…lacks critical elements of independence, transparency, and granularity."
Asked about the letter by the committee, the SEC's former chief accountant, Lynn Turner, said the letter reflects "a serious problem from the top down of management, that can bring an organization down."
Former AIG CEO Sullivan said accounting rules required AIG to mark down the value of its holdings, even though it had no plans to sell them, the "mark to market" provision.
AIG had to sell at "fire sale prices," he told skeptical members of Congress. "Suddenly a company with a trillion dollars in assets" was in trouble, said Sullivan.
Waxman questioned both former CEOs about a former AIG auditor who claimed he had been blocked from reviewing the books of a London-based division that has since been blamed for a large share of the company's downfall.
Former CEO Willumstad, chairman of the AIG board at the time, said "I honestly don't remember" the concerns raised by the former auditor.
"I find that very disturbing," said Congressman Waxman.
Waxman also said there is evidence the two men changed the bonus schedule once the company began to post losses, so that executives under the "Senior Partners Plan" would continue to make multi-million dollar salaries.
"Mr. Sullivan and the other top executives should have had their bonuses slashed due to poor performance," said Waxman.
Sullivan said it was "substantially reduced" by the board in 2007 due to poor performance.
Sullivan was given a $15 million "golden parachute" payment after being replaced as CEO in June.
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