Ailing insurer AIG - which received 180 billion dollars in federal aid - is to give out millions of dollars in bonuses this week, according to a report Saturday.

American International Group CEO Edward Liddy told Treasury Secretary Timothy Geithner bonuses could not be cancelled due to a risk of lawsuits for breaching employment contracts, the Washington Post said.

In a letter to Geithner - who has expressed dismay over the payments - Liddy also indicated a refusal to pay bonuses worth tens of millions of dollars would prompt an exodus of senior employees.

“We cannot attract and retain the best and brightest talent to lead and staff the AIG businesses — which are now being operated principally on behalf of the American taxpayers — if employees believe that their compensation is subject to continued and arbitrary adjustment by the US treasury,” Liddy wrote, according to the Post.

After pumping some 150 billion dollars into the crippled insurance giant, the US government earlier this month unveiled an additional rescue plan worth 30 billion dollars.

The plan, which saw the government take a major equity stake in the firm, was billed as an effort to stave off the collapse of what had been the world’s biggest insurer.

Although AIG has agreed to cut back on multi-million-dollar bonuses for its highest ranking officers, others will receive full payment if the company’s restructuring is followed through, the Post said.

The firm’s lower-ranked employees are still set for a massive pay day.

Bonus payments to thousands of employees totaling “in the hundreds of millions of dollars” are to be given out, the daily reported.

For the fourth quarter, AIG announced a loss of 61.7 billion dollars - the biggest ever for a US firm in one quarter - pushing up its net loss for 2008 to 99.3 billion dollars.

Source: AFP