Washington – A government auditor harshly criticized the Treasury Department for approving “excessive” pay packages for top executives at three companies that received large government bailouts.
Christy Romero, the special inspector general overseeing the $700 billion Troubled Asset Relief Program, criticized the Treasury for approving pay raises at General Motors Co., Ally Financial Inc. and American International Group Inc.
The report released Monday was critical of the Treasury’s special master overseeing executive pay at companies that got very large bailouts: Cash salaries of $450,000 or more were approved for 94 percent of the top 25 employees each at AIG, GM and Ally.
“While taxpayers struggle to overcome the recent financial crisis and look to the U.S. government to put a lid on compensation for executives of firms whose missteps nearly crippled the U.S. financial system, the U.S. Department of the Treasury continues to allow excessive executive pay,” the report said.
The executives at GM, Ally and AIG “continue to rake in Treasury-approved multimillion-dollar pay packages that often exceed guidelines” previously announced, the report said.
AIG repaid its government bailout in December and is no longer subject to the pay restrictions. Initially seven companies — including Chrysler Group LLC, Chrysler Financial, Citigroup Inc., and Bank of America — were covered by the restrictions.
Patricia Geoghegan, the Treasury’s “pay czar,” agreed to shift more pay away from longer-term incentive pay. She removed long-term restricted stock for senior executives, including the CEOs of AIG, GM and Ally. In total, she removed long-term restricted stock from 24 of the 34 employees’ pay packages and for all but one of the 24 employees, replaced it with stock salary, as requested by the companies.
In total, she approved pay packages worth $5 million or more for 23 percent of the top 25 employees at AIG, GM, and Ally — nine at AIG, three at GM and four at Ally.
The Treasury approved all 18 pay raises — totaling $6.2 million — that were requested by the companies. Nine of those raises went to GM executives.
The Treasury Department declined to comment on the report beyond a letter submitted to the auditor. Geoghegan said in a letter that she has “limited excessive compensation while at the same time keeping compensation at levels that enable the” companies “to remain competitive.”
Treasury noted that average cash pay was cut by more than 90 percent over the pay received before the bailouts.
“We will review whether there are additional ways to improve our processes,” the letter said.
The Treasury agreed to shift compensation to stock salary — which is earned immediately — from restricted stock that vests over time when an “executive is very senior and may retire in the next few years.”
The letter asserts that Treasury “always expected” to lose money on its $85 billion auto bailout, but said the profits from the bank bailouts will more than offset the losses.
GM spokesman Dave Roman said the automaker is performing well “while complying with all TARP restrictions and special master’s decisions.”
Ally spokeswoman Gina Proia said the Detroit-based auto finance company’s pay complies with Treasury determinations and the company “is focused on strengthening its leading auto services and direct banking franchises, while also executing on a number of transformative strategic actions that will best position the company to repay the remaining Treasury investment.”
In a Detroit News interview last year, Ally CEO Michael Carpenter noted that Ally — which is 74 percent owned by the Treasury as part of a $17.2 billion bailout — won’t get out from under the restrictions until the government sells all of its stake.
Carpenter recounted a conversation with GM’s Akerson. “He says, ‘If I get down to 10 percent ownership, maybe I can get rid of these guys?’
Carpenter laughed and retorted. “If they own one share, they can torment you for the rest of your life,” he said.
The audit said the pay raises ranged from $30,000 to $1 million — 1 percent to 23 percent.
Treasury approved raises at GM of 15 percent to 23 percent without any further detail or analysis for four employees “on the basis that they were among the individuals that GM’s CEO most relied on, and they had received significant promotions or increased job responsibilities,” the audit said.
The audit said that for one GM employee who received a cash salary of $600,000 in 2011, Treasury approved an additional $50,000 in cash in 2012.
“When asked why the employee received the raise, (Treasury) told SIGTARP that GM wanted to retain the employee and ‘do a little extra for him,'” the report said.
GM has long complained about the pay restrictions, including in its 2012 proxy statement.
In March, weeks before the Treasury pay czar approved the 2012 pay packages, GM CEO Akerson met with Treasury Secretary Geithner — without the pay czar present — asking Treasury to release GM from Treasury’s pay limits by lifting the restrictions, the audit said.
Previously, Akerson’s meeting had become public with Geithner, but GM declined to discuss the subject matter.
Geithner rejected GM’s request.
Treasury did agree in December to end the government’s restrictions on GM using corporate jets after GM repurchased 200 million shares of company stock held by the Treasury for $5.5 billion.
The special inspector general removed from Akerson’s pay package incentive compensation tied to meeting performance criteria, shifting the same amount to stock salary that is earned immediately, the report said.
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