Senator outraged over AIG funneling $2.5B to UBS

Federal aid to American International Group Inc. that may have been funneled to UBS AG, the Swiss banking giant that settled a U.S. criminal investigation last month, drew the ire of Sen. Olympia Snowe yesterday.
“It looks like we’re simply laundering this money through AIG,” the Maine Republican said at a Senate Finance Committee hearing.
The Department of the Treasury, starting with the Bush administration, has paid $170 billion in bailout money to AIG of New York, which nearly collapsed from its involvement in credit default swaps.
The insurance giant acknowledged over the weekend that last fall it paid $2.5 billion to Zurich, Switzerland-based UBS, including $800 million through credit derivative contracts with the bank and $1.7 billion under a securities-lending program.
Ms. Snowe noted that AIG payments more than covered the $782 million that Switzerland’s biggest bank agreed to pay to settle a probe by the Department of Justice.
“Frankly, it’s preposterous,” she said.
As part of its settlement last month, UBS acknowledged that it used offshore accounts to help shelter American clients from U.S. taxes.
It is now locked in a court dispute with the Internal Revenue Service, which wants the bank to release the names of as many as 52,000 American clients. UBS has refused.
In a press release issued yesterday, Ms. Snowe said, “The Treasury Department needs to take a close look.”
Treasury spokesman Isaac Baker didn’t immediately respond to a request for comment.
AIG didn’t return a call seeking comment.
UBS spokeswoman Karina Byrne declined to say immediately whether the money that the company received from AIG came from the government.
The request by Ms. Snowe is part of a larger congressional furor over AIG’s payment of $165 million in bonuses.
Ten Democratic senators have urged AIG chief Edward Liddy to renegotiate the bonuses paid to executives at the unit which handled credit default swaps. The government owns 80% of AIG.
Mr. Liddy is scheduled to testify before Congress this morning to defend the bonus payments.

Related Topics: American International Group (AIG), UBS AG