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Connecticut Attorney General Slaps AIG Executives With Subpoena

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This is a rush transcript from "Your World With Neil Cavuto," March 23, 2009. This copy may not be in its final form and may be updated.

NEIL CAVUTO, HOST: All right, to Wilton, Connecticut, the site of protests outside of homes of AIG executives. Many of those executives have promised to give their bonuses back.

So, why is my next guest slapping them in a subpoena?

With us now, the attorney general of the state of Connecticut, Richard Blumenthal.

Why this, why now, Attorney General?

CONNECTICUT ATTORNEY GENERAL RICHARD BLUMENTHAL: Our banks committee in the legislature and our executive branch is very interested in more facts about the system of compensation that led to the kinds of risk-taking that, in turn, created the circumstances for this company AIG's collapse.

Even more immediately, we want this money back for taxpayers, as you well know, $218 million, higher than previously thought or widely understood. And that also is a goal of these subpoenas, to learn more about what these employees did, because the companies invoked Connecticut law, our wage protection act, saying these kinds of compensation are wages, apparently. But they are really bonuses. And we want to verify that fact.

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CAVUTO: Does it worry you that one could look at what you are doing, Attorney General, and say, well, what is to stop them from going after other countries that have bonus contracts in place if he is going to start, willy-nilly, questioning the legality of when they were put in place or why they were put in place?

BLUMENTHAL: Good question. Good question.

The — the issue here is taxpayer money from bailouts that were designed to rescue the company, when, otherwise, it would have been bankrupt and these contracts would be worthless, the contracts that supposedly compelled payments of these bonuses. So, there are clear distinctions here...

CAVUTO: No, you are right.

BLUMENTHAL: ... the use of taxpayer money.

CAVUTO: But what if these were, to use a medical analogy, preexisting conditions, preexisting contracts given at a time beforehand, that, contract law being contract law, even though public money later came in — believe me, I'm not an apologist for what when on here — but that that is the slippery slope part; you are interfering in commerce?

BLUMENTHAL: Contracts are — contracts are modified all the time.

We are not seeking to interfere with the contracts. We are asking the employees to give back the money, because it came from taxpayers. And the contracts themselves would be renegotiated.

CAVUTO: Well, see, they are saying it is not. Attorney general, they are saying it is not, that this was money that was agreed to before public moneys came in, and Congress, many in your own party, knew very well these stipulations, including the treasury secretary, who said, legally, he couldn't unwind it and change it.

And now everyone is making big hay of it, maybe for perfectly justifiable reasons. But it is a risk when you start ripping that up to suit the political rage of the moment.

BLUMENTHAL: Well, I think that concern is very well justified.

Keep in mind that nobody is saying that we are going to impair or negate the contracts themselves. The tax proposals that would impose a surcharge and the other measures that have been proposed would focus on the results, the payments that have been made, without impairing the contracts.

Now, you may say it is the same thing, but, in fact, it is very different from a legal standpoint. And remember, also, contracts are renegotiated all the time. Labor unions decide on givebacks of wages and health benefits. And other contracts can be declared void for impracticability or unconscionability.

For this company to challenge those contracts, not the government, but the company, would not have been out of the realm of possibility.

CAVUTO: OK.

Attorney General Blumenthal, always good having you on. Thank you very much.

BLUMENTHAL: Thank you.

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