AIG PAID more than $40 million (€29.45 million) in controversial retention bonuses to staff at its troubled financial unit in December, three months ahead of schedule, according to the resignation letter of an executive at the insurance group.

News of the decision to pay bonuses of $165 million to staff at AIG sparked political outrage and protests in the US Congress, after the insurer was bailed out with $173 billion of public money last year. Before the publication of the letter, momentum on draconian legislation to claw back bonuses had begun to slow.

Jake DeSantis, a manager in AIG’s financial products unit, said AIG “accelerated by three months [the payment of] more than a quarter” of the $165 million of retention bonuses due to the division’s employees.

“That action signified to us your support and was hardly something that one would do if he truly found the contracts ‘distasteful’,” Mr DeSantis wrote to Edward Liddy, AIG’s government-appointed chief executive, in a letter first published in the New York Times.

Mr Liddy earlier called the bonuses “distasteful” in an appearance in the US House of Representatives.

The house voted for a 90 per cent tax on bonuses at AIG and other financial institutions that have taken government funds.

The leading members of the Senate finance committee have drawn up proposals for a 70 per cent tax.

AIG, which is 80 per cent controlled by the government, confirmed yesterday that a payment of about $50 million was made in December to AIG financial products employees but declined to comment on whether that was ahead of schedule.

Mr DeSantis, an 11-year AIG veteran, added that in October AIG's management reassured employees "on three occasions" that it would honour their guaranteed bonuses. – ( Financial Timesservice)