As we try to develop a comprehensive picture of what exactly happened at AIG’s compliance group over the last couple of years (the very group tasked with ensuring that the company complied with laws and regulations), sources have provided additional pieces of the puzzle.

Christina Mallus, the legal HR manager during the crisis at AIG, whom we understand has since been promoted, was deeply involved in assisting senior compliance management (Anastasia Kelly, Suzanne Folsom, Kathleen Chagnon and Karen Nelson) in their successful efforts to make senior compliance officers disappear if they raised issues of mismanagement. Several compliance officers complained to management and wrote letters to the AIG board of directors before September 2008. These complaints and letters, which contained allegations of incompetence, lack of resources, discrimination, racism, cronyism and nepotism, were seen by Kelly, Folsom and the others as cause for retaliation and dismissal. Kelly, in fact, controlled all avenues of whistleblowing at AIG; even the Ethics Hotline reported back to her.

In his March 2009 report to the SEC , then-Independent Consultant James Cole noted the ‘layoff’ of compliance officers executed by Folsom the previous fall:

“In the fall of 2008, AIG terminated the employment of ten additional compliance professionals in the OC [Office of Compliance], including the DCCO [Deputy Chief Compliance Officer], Risks, and the DCCO, Life and Retirement Services. These individuals had responsibilities in the following areas: anti-money laundering (“AML”), Foreign Corrupt Practices Act (“FCPA”), code of conduct, investigations, insurance, privacy, training and risk assessments.” (pp. 8-9).

Curiously, though, Cole made no inquiries about the layoff, despite the fact that subsequent to it, Folsom and Kelly petitioned to have his monitoring suspended for six months because, in part, the AIG compliance staff was overworked, according to them (p. 10). Clearly, the layoff was not precipitated by lack of demand for the compliance officers’ services, but neither Cole nor Mallus, as HR Manager, asked any questions.

If they had, they would have found that anyone who expressed concern about mismanagement in the compliance and legal divisions was either ostracized or terminated. In particular, questions about overspending on under-qualified consultants and conflicts of interest were discouraged and suppressed. Critics were either eliminated in the October ’08 dismissals, or they were singled out and picked off, when they expressed skepticism about the compliance and regulatory work actually being accomplished.

Maurice ‘Hank’ Greenberg was reputedly the singular voice of AIG for 40+ years, and Anastasia Kelly, for all intents and purposes, became that voice prior to and during the AIG collapse. We’re told that Kelly was effectively running the company for a CEO who was put in place to liquidate the whole sorry mess, although Kelly herself lacked both judgment and ethics. She made three disastrous staffing decisions. First, she hired Gerald Kral, who was later fired for stealing from the company. Next, Kelly hired Kathleen Chagnon, who was unceremoniously relieved of her responsibilities for racist remarks and discriminatory conduct, among other things. Third, Kelly hired Suzanne Folsom who “resigned to pursue other opportunities” (read “fired” for her own poor judgment) in December 2009. These particular personnel disasters were a consequence of Kelly’s cronyism – she hired her friends, regardless of their qualifications and values. It is hardly surprising, then, that three of Kelly’s major hires had to be dismissed.

As we know, Kelly herself then hastily left the company in December 2009 because, as she confessed in her misguided interview with Fortune, her severance was at risk and she couldn’t work for $500,000 a year. It has been well-publicized that Kelly may have organized senior managers to fight Kenneth Feinberg, the US Paymaster for bailed out companies, and to threaten to quit AIG if their pay was cut In response to this action, AIG was finally forced to hire outside counsel and investigate Kelly’s actions before paying out her severance. We understand that outside counsel provided an inconclusive verbal report to the AIG board, which is typically done when an attorney does not want to provide a written opinion. In other words, it was unclear whether Kelly had breached her fiduciary obligations to AIG, so she collected a multi-million dollar payment and bailed out herself. Thus far, then, management of the AIG compliance and legal offices has been absolutely unaccountable for what happened there. On the contrary, incompetence and abuse of authority has paid off handsomely.

More to come.

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Beatrice Edwards is International Program Director of the Government Accountability Project, the nation’s leading whistleblower advocacy organization.