That's pretty amusing, but few are laughing at AIG's barefaced--probably bare-buttocked, too--trip to the spa.

Initially, new A.I.G. CEO Edward Liddy agreed that the retreat--now classified as a reward trip for star independent agents, scheduled well before the company's collapse--was improper, which he "would have stopped...if anyone had told him."

Liddy then adjusted his stance. In a letter to Treasury Secretary Henry Paulson, Liddy, without apology, defends the trip as "accepted practice in the insurance business."

The letter's penultimate paragraph says, "...we understand that our company is now facing very different challenges – and that we owe our employees and the American public new standards and approaches. Let me assure you that we are reevaluating the costs of all aspects of our operations in light of the new circumstances in which we are all operating."

With A.I.G. spokesperson Nicholas Ashooh mumbling something about "pain and distress to our employees," the company is now getting another Federal loan for $37.8 billion, adding to last month's $85 billion line of credit, of which A.I.G. has already zapped $61 billion.

It just doesn't feel like that long ago that A.I.G. was emerging from its last regulatory crisis, the accounting scandal that saw Hank Greenberg out as CEO in 2005, replaced by Martin J. Sullivan, remarkably only the company's third CEO since its founding in 1919.

Sullivan, the son of a Ford plant foreman in east London, started with the company in London in 1971 as a 17-year old clerk. That means he had loads of time to get to know the inner workings of the A.I.G. empire.

Here is Sullivan talking to Chief Executive magazine in August 2006, a year and a half after taking over as CEO:

Q: Coming in as a new CEO affords an opportunity to view everything afresh. Were you tempted to make wholesale changes or hold steady?

A: We want to build on the core businesses of AIG (general insurance, life and retirement services, financial services and asset management), look at them on a more global basis and see where we can expand and whether it makes sense to do so. One of the things I always think about at 3 a.m. in the morning, amongst many other things, is, is there a fifth leg to the stool? Is there something else out there that would contribute to AIG’s growth? It hasn’t presented itself yet, but we think about it constantly.

Q: In modifying its governance practices in the wake of the settlements with the government, what change do you feel most benefited the company?

A: The disclosure in our K and Q statements has been much more detailed, as is the information given in the supplemental data. In our third quarter 2005 conference call, we actually ran out of questions from the investment analysts because our transparency and level of disclosure was fairly comprehensive.

Somehow, not fairly enough.

Welcome sir, are you here for the pedicure, or the severe haircut?

Jeff Heilman

10/9/08