During the 1990s, Sens. Kerry and Edward Kennedy, D-Mass., helped win new federal funding for the project as its costs skyrocketed and threatened to burden the state’s government. In 1998, Kerry was credited with winning $100 million in new federal funding.
But in 1999, the Transportation Department uncovered a financing scheme in which the project had overpaid $129.8 million to AIG for worker compensation and liability insurance that wasn’t needed, then had allowed the insurer to keep the money in a trust and invest it in the market. The government alleged AIG kept about half of the profits it made from the investments, providing the other half to the project.
Outraged by the revelations, McCain submitted legislation that would have stripped $150 million from the Big Dig and banned the practice of allowing an insurer to invest and profit from excessive premiums paid with government money. “Any refunds of insurance premiums or reserve amounts, including interest, that exceed a project’s liabilities shall be immediately returned to the federal government,” McCain’s legislation declared.
But Kerry and Kennedy intervened, and McCain withdrew the legislation in 2000 in favor of the hearing.