I have come to the sad conclusion that the people running AIG are idiots. Dolts. Complete and irredeemable morons.

I defended the Southern California retreat for which AIG took so much heat. That event was an incentive for top-performing life insurance salespeople. It was part of the compensation for their contributions and necessary to keep the company’s top performers from defecting to the competition. If anything is going to help AIG get out of its hole and repay the taxpayer bailout it received, it will be top performers selling their asses off. Instead of criticizing the event, I suggested AIG should have foreseen how the retreat would be perceived and been proactive in communicating what the event was, who it was for, and why it was an investment in future sales.

Today, it has been revealed that AIG held another event at a posh Arizona resort. The rationale for the event makes perfect sense. AIG’s CEO Edward Liddy explained the rationale after the event was exposed by local TV news reporter Josh Bernstein. Exposed because AIG made every effort to keep the event a secret.

Brilliant planning there, Fast Eddie. Like nobody’s paying careful attention to every minuscule move your company makes. (News flash, Ed: You’re under the world’s biggest freaking microscope.)

I can just imagine the conversation among the reality-challenged executives who made this monumentally stupid decision:

Executive #1: We need to train the independent, non-employee financial planners who recommend our products to their clients. The more knowledgable these planners are about our products, the more inclined they’ll be to recommend them, and to the right clients. We rely on these guys for sales; the training is a necessary investment in those sales.

Executive #2: Well, yeah, all the companies in our line of business do this as a matter of routine. But we have a problem most of our competitors don’t have. The public couldn’t possibly understand this and, because of that bailout thing, if they see us sponsoring an event like this, they’ll crucify us.

Executive #3: Why don’t we just host the event at some Ramada Inn in East Bumcrap, and instead of sending our top execs for the planners to meet, we’ll send mid-level sales support staff?

Executive #2: Are you nuts? What financial planner would invest his own money and time to come to a meeting in a Ramada Inn in East Bumcrap? We’ll end up with three has-been B-list football players who got mail-order degrees in financial planning. We need to train 150 of the best, most sought-after financial planners in the country if we’re going to produce the kind of sales we need.

Executive #1: He’s right, you know. These guys are high-powered players. They only turn out for top-drawer events. And they expect to hobnob with the top brass.

Executive #3: Hey, I have an idea. We’ll do it in secret. We’ll make sure the hotel staff is in on it, we’ll come up with a fake company name and a fake logo. It’ll be cool, just like an undercover operation. I’ll be Jack Bauer. You can be James Bond.

Executive #1: I love this plan. But I wanna be Jack Bauer.

After his company was caught—hidden camera and all—Liddy went public and made a number of points:

• Most of the tab was picked up by sponsors and participants (the company even released a list of the partners who covered the costs)
• The company has canceled some 160 planned events; the ones kept on the company’s calendars were deemed mission-critical (like training independent planners to sell your products so you can make a ton of money and repay your debt)
• The fancy hotel rooms in which AIG execs stayed were comped by the hotel as part of the total $360,000 package (90% of which, remember, was paid for by partners and participants)

Anybody who has spent time in business recognizes these as legitimate points. But it’s hard to convince anybody you’re telling the truth after you’ve been caught in a cover-up. Footage shown by the Phoenix ABC-TV affiliate included the KNXV reporter confronting a couple AIG execs as they hurried, tight-lipped, onto their flight.

After a performance like that—along with other damning footage on top of the revelation that AIG tried to pull this off covertly—few are inclined to believe a word Liddy says. His quote—“We appreciate what the taxpayer and the federal government has done for us…We intend to pay back every penny we’ve borrowed”—rings especially hollow after being caught in a premeditated, willful effort to deceive. Sure, Liddy did the right thing by appearing on CNN’s Larry King to personally address the charges, and a press release was issued defending the event. But it was way too little, way, way too late.

So now AIG has federal legislators calling for Liddy’s head on a platter and taxpayers itching to form a lynch mob, pitchforks and torches at the ready. All of which could have been avoided if AIG had just been transparent. Rather than assume the public is too stupid to understand its business, AIG should have explained up front the realities of the financial services market, how companies like AIG rely on independent agents to sell their products, how training these agents is what generates sales, and how these sessions need to be upscale or the agents won’t come and your product won’t sell. Maybe a lot of people wouldn’t have liked it, but AIG would be in a lot less trouble than they are now.

If this is the kind of leadership Liddy has to offer, maybe he should resign. But unless AIG’s top PR counselor (I have to assume this is Communications Senior Vice President Nicholas J. Ashooh) advised against this fiasco and was overruled, he definitely needs to go. (Besides, any PR counselor with an ounce of ethics would have resigned before engaging in such an ill-advised cover-up.)

AIG’s predicament should serve as an object lesson for executives at other companies who may still believe that opacity is a viable business strategy in today’s environment.