Embattled AIG Turns To Crisis Managers

They took lavish junkets and paid bonuses to purveyors of exotic financial instruments. Now add this to the list of extras American International Group Inc. has paid for while grasping a federal lifeline: The once-mighty insurance giant has turned to a seasoned Washington crisis manager to repair its tattered reputation and help it weather the escalating public backlash.

Levick Strategic Communications, first tapped by AIG last year, is known for coaching prominent players through the messiest of cases, from the Catholic Church's sex abuse scandal to the controversy surrounding a Dubai-based company's contract to run some U.S. ports. It's a player in a vibrant and lucrative cottage industry in the nation's capital - helping high-profile people and companies rescue their images after well-publicized missteps.

Now, as AIG faces congressional grillings and an enraged public, Levick is on the front lines, dispensing advice to embattled chief Edward Liddy. On Wednesday, Levick crisis adviser Michael W. Robinson was on hand in the packed Capitol Hill hearing room where Liddy was peppered with questions from outraged lawmakers.

AIG hired Levick in June, according to a person with knowledge of the relationship who spoke on condition of anonymity because he was not authorized to divulge the information. Back then AIG was buffeted by a management shake-up, a federal probe and Wall Street downgrades, and its former CEO Maurice R. "Hank" Greenberg had declared the company "in crisis," saying it had lost credibility with investors.

Neither AIG nor Levick would talk about their ties - not surprising, given that crisis communications by definition is highly secretive, with both client and consultant striving to shape public perceptions without leaving fingerprints. AIG spokesman Mark Herr declined to comment, as did Robinson.

People familiar with Levick and the business of crisis public relations estimate that AIG could have paid Levick a retainer of $1 million or more, although such work varies widely in price.

Herr sent The Associated Press a statement explaining that AIG has retained several outside public relations firms to help serve its needs as it restructures. Those companies "are helping to address in as timely a manner as possible the intense internal and external communications demands since AIG's financial crisis began," the statement said. The firms don't lobby, AIG added, and their costs "are vastly offset by cuts in AIG's advertising and sponsorship activities."

In any case, it's not entirely clear whether AIG got its money's worth.

While working with Levick and receiving federal bailout money, AIG spent some $440,000 on a posh retreat for executives at the exclusive St. Regis Resort, Monarch Beach in Dana Point, Calif. Then it went through with an $86,000 partridge-hunting trip in the English countryside. And last week's decision to pay out previously planned bonuses to hundreds of employees, including some in the Financial Products unit whose dealings helped drag the company down, has drawn the predictable share of outrage from the White House to water coolers and kitchen tables around the nation.

Insiders say even the most brilliantly choreographed public relations strategy won't make a dent in public perceptions of a company like AIG unless it reforms itself - and maybe not even then.

"Once the company plays Moses and shows the public how they're going to get out of the wilderness, then they do have a number of options, and a good crisis manager can help figure that out," public relations specialist Eric Dezenhall said.

Better yet, said Paul Argenti, who has worked extensively in public relations for financial services companies, is that they avoid getting into the wilderness in the first place.

"Companies need to understand that if you can solve problems before they happen, you don't get into crisis," said Argenti, who teaches communications and management at Dartmouth University's Tuck School of Business. "They're more than happy to spend a ridiculous amount of money after they get in trouble."

At that point, Argenti added, the most a crisis manager can do is provide tactical advice, like how to testify before a hostile House committee as Liddy did Wednesday. "If you wait until you're in a situation like AIG is in, there's no one on the planet who can help you."

In fact, Levick's executives routinely advise companies to look out for their reputations before crisis hits. In a recent posting on the firm's blog - dubbed "Bulletproof" in an apparent reference to the status they hope to convey on their clients - Robinson singled out Citigroup Inc.'s purchase of a $50 million corporate jet as a perfect example of what a company getting federal bailout money shouldn't do.

"What was once kosher is now taboo. Luxurious and excessive spending is on everyone's radar screen," he wrote. "The sooner that corporate executives come to terms with this new reality, the sooner they will be able to keep their companies out of the headlines and out of trouble with their most vital stakeholders."

But what's good for clients isn't always good for the crisis managers themselves.

In a blog posting Wednesday, company president Richard S. Levick offered financial services companies advice that his own firm was rejecting: "'No comment,"' he wrote, "is akin to uttering, 'We're guilty."'

On Wednesday, it was revealed that Sen. Christopher Dodd, D-Conn., at the urging of the Obama administration, placed a clause in the economic stimulus package that created a loophole on bonuses paid by bailout recipients.

Since no legal restrictions can be placed on bonuses prior to their release, lawmakers rushed to draw up bills in both the House and Senate to impose heavy new taxes on them.

The top two members of the Senate Finance Committee on Tuesday announced a bill that would impose a 35 percent excise tax on the companies paying the bonuses and a 35 percent excise tax on the employees receiving them. The taxes would apply to all companies receiving government bailout money, but they are clearly geared toward AIG.

"I think we're on the path to where at least most of the money is going to be given back," Michael Santoli, associate editor at Barron's, told CBS' The Early Show. "I do think this crescendo of outrage has basically had its effect in that regard."