AIG: The PR Nightmare That Keeps on Giving

Last Weekend Bonus Story, This Weekend AIG Suing the IRS

How many WTF? moments will the American International Group give us by the time the company is once again solvent or is finally taken out behind the barn and put out of its misery?

Last Saturday night, with just enough time to allow the Sunday shows to prepare killer questions for Larry Summers, the AIG bonus story entered the media consciousness.  If you’ve been in a cave all week the story goes something like this: Since last September the U.S. government has pumped $170-180 billion into the gaping maw of the world’s largest insurer and biggest loser in the reality show known as the credit default swap market.  Uncle Sam now owns 80% of AIG.  It was revealed last Saturday that the company has paid $165 million in bonuses to executives and staff of its financial products division.  This is the division that has essentially ruined the entire company.  The American public is royally pissed off and every politician worth his or her salt is “outraged.”

Today – which is Friday and will give those Sunday show producers more time to develop their zingers – it was revealed that AIG is suing the U.S. government.  From the Washington Post:

The big insurer is trying to recover $306.1 million of taxes, interest and penalties from the Internal Revenue Service. Among other things, AIG is contesting an IRS determination last year that the company improperly claimed $61.9 million of tax credits associated with complex international transactions.

AIG has also asked a court to make the government reimburse it for money spent suing the government.

Given that the government owns 79.9 percent of AIG and has been using taxpayer money to fill a seemingly bottomless hole at the company, the lawsuit might seem like a case of biting the hand that feeds it. But an AIG spokesman said the company has an obligation to press its case.

WTF?

OK, the legal case can be made – perhaps even the philosophical case on some level – that the corporation is obligated to pursue this action.  For 99% of companies this would be a no-brainer.  Sue the hell out of the IRS.

But things are a wee bit different in this case aren’t they?  AIG has officially become the face of this Great Recession.  AIG is the corporate face on the milk carton that is the U.S. financial crisis.  The American taxpayer now owns AIG because Ben Bernanke, Hank Paulson and Timothy Geithner are afraid to let the company fail.

Most taxpayers aren’t going to look at AIG’s suit against the government the way in which a chief legal counsel would view the matter.  Taxpayers are already mad as hell that they own the company, disturbed that their dollars paid bonuses to losers and will no doubt take the attitude that if AIG was overtaxed, then we should take it off of what they us.

What AIG might want to consider as it moves forward in wasting the government’s time with lawsuits is a peculiar aspect of value for any business – goodwill.  Goodwill is hard to put a price on.  In the case of AIG, their goodwill is currently worth $0.  No matter how defensible a legal action is at this time for the company, I don’t know that it’s worth driving the worth of their goodwill into negative territory – perhaps forever.