Former AIG execs draw fire from U.S. lawmakers

By Kim Dixon and Rachelle Younglai

WASHINGTON (Reuters) - Lawmakers criticized American International Group Inc (AIG.N) on Tuesday for ignoring financial warnings and for lavish spending, including an executive retreat just days after getting an $85 billion (48.6 billion pound) rescue loan.

Former top executives, who blamed the insurer's woes on aggressive accounting rules and short sellers of AIG stock, drew further fire at a congressional hearing for a $1 million-a-month consulting contract given to an executive who once headed its financial products unit.

"They were getting facials, manicures, and massages, while the American people were footing the bill," said Rep. Elijah Cummings, a Maryland Democrat on the House Oversight and Government Reform Committee.

The Federal Reserve extended the two-year loan on September 16 as AIG faced a cash crunch following $18 billion of losses over three quarters, mainly on complex securities tied to mortgages that have declined in value.

Robert Willumstad, chief executive of AIG from June until he was replaced last month, told the oversight committee he was not aware of the retreat that included $200,000 in hotel rooms and $23,000 for spa services. "... had I been aware of it, I would have prevented it from happening."

The oversight committee examined thousands of pages of internal documents produced by AIG and former executives.

Committee Chairman Henry Waxman revealed a letter from the Office of Thrift Supervision (OTS) and a warning by AIG's accountants about material weaknesses at AIG.

"A material weakness exists within corporate management's oversight of (the company's financial products unit) super senior Credit Default Swap (CDS) valuation process and financial reporting," said the March 10 letter to AIG's board from the OTS, a division of the Treasury Department.