Tuesday, March 24, 2009

Atlas Insurance Group, pt 5

Oh, for Pete's sake. AIG's now notorious "Financial Products" division is in trouble with the IRS for helping set up dodgy tax shelters for its counter-parties: AIG's Bonus Unit Now in IRS's Sights

Some of the same banks that got government-funded payouts to settle contracts with American International Group Inc. also turned to the insurer for help cutting their income taxes in the U.S. and Europe, according to court records and people familiar with the business.

The Internal Revenue Service is challenging some of the tax deals structured by AIG Financial Products Corp., the same unit of the New York company that has caused political ire over $165 million in employee bonuses.

The company paid $61 million last year in disputed taxes stemming from the deals but sued the U.S. government last month in federal court in New York, seeking a refund, according to filings in the case.

Banks that worked with AIG on tax deals include Crédit Agricole SA of France, Bank of Ireland and Bank of America Corp., according to AIG's lawsuit. The banks declined to comment.

The AIG debacle continues to be an under- and misreported story with a media/congressional mob forming over penny-ante bonuses while billion dollar rip-offs are relegated to the newspaper's back pages. 

The incuriosity about these sorts of things is chilling. Certainly, there are congressmen who are aware of what is happening, and who are exercising a modicum of oversight, but their efforts go unaired in the media. Look at what happened with the "bonus" story. The Obama administration and its allies almost got away with claiming that they were "shocked! shocked!" by it all. As it turned out, the bonuses were discussed in detail, and were the subject of congressional inquiry just two weeks ago. But, the only way you would have known that would have been if you were actually at the hearing!

We are not hearing the full story of AIG, nor are the bad actors being exposed and punished. Rather than demanding the return of bonuses, we should be seeing demands that AIG's financial products division be prosecuted for fraud, if anything. Instead, many apparently are still on the job, or have been allowed to leave discreetly. There has been an unregulated and unsupervised expenditure of $170 billion because of these guys. The present circumstance is simply an injustice. I doubt the financial system can truly recover a sense of trust, and thus cannot recover its bearings at all, until malefactors such as these are brought to justice. 

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