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After bailout, AIG living it up

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American International Group Inc. scrapped a seaside conference at a California resort amid a barrage of criticism for spending $440,000 on a similar event days after getting an $85 billion federal bailout.

AIG canceled the conference at the Ritz-Carlton in California's Half Moon Bay "after a re-evaluation of the costs under the new circumstances," said spokesman Joe Norton. Senate Finance Committee Chairman Max Baucus, D-Mont., on Thursday demanded more details from the Federal Reserve on AIG's event last month, including "who we can fire."

"This kind of behavior is an insult to taxpayers," Baucus wrote in a letter to Fed Chairman Ben Bernanke. He asked for a response by Oct. 23.

Events such as those hosted by AIG to reward top salesmen are common at financial firms. Wachovia Corp., the lender in talks to be acquired after losing $9.5 billion this year, is sending 75 brokers and their spouses on a cruise to the islands of Greece this weekend, said spokesman Jim Griffin, confirming a report earlier Thursday in the Los Angeles Times.

"Incentives for sales departments have proven over time that they work, and that's true in every business that depends on the selling effort," said Dean Bare, managing director of Stanton Chase International, an executive-search firm. "If these trips didn't work, they would have stopped doing them a long time ago."

Even so, perceptions matter, said Heather Elms, a professor at the Kogod School of Business at American University in Washington. "Whether the company's behavior is wrong on an absolute basis doesn't really matter right now," she said. "It seems that they're being viewed as behaving unethically."

AIG's event next week aimed to "motivate and educate" about 150 independent agents who sell AIG coverage to high-end clients, spokesman Nicholas Ashooh said Wednesday. The insurer hosts similar conferences "around the world all the time," he said, to reward self-employed agents. Norton said Thursday he didn't know whether AIG would cancel other such plans.

Ritz-Carlton spokeswoman Vivian Deuschl declined to say how much AIG would pay to cancel. Companies typically forfeit a deposit of half the estimated cost of a conference if they cancel close to the date, said Anne Bodnar, who organizes similar gatherings for financial clients for Intermarket Communications in New York.

AIG reversed itself on the conference a day after striking an agreement that will enable it to access an additional $37.8 billion from the Federal Reserve Bank of New York. Chief Executive Officer Edward Liddy told Treasury Secretary Henry Paulson Wednesday that the company will rethink expenses.