UPDATE 4-U.S. states seek to join feds in AIG bonus probe

* States would join federal probe

* NJ says states might still act on their own

* AIG accused of "half-truths" on bonuses
(Updates with AIG comment, pagagraph 6)

By Jonathan Stempel

NEW YORK, June 19 (Reuters) - U.S. states probing employee
bonuses paid by American International Group Inc (AIG.N) using
taxpayer money plan to join federal investigators in the
matter, while leaving open the possibility of pursuing the case
themselves.

Since March, a 19-state coalition has been investigating
$165 million of bonuses paid at an AIG unit whose losses on
derivatives would lead to a $180 billion taxpayer bailout. The
government now owns close to 80 percent of New York-based AIG.

In a Friday letter to Neil Barofsky, the special inspector
general of the Treasury Department's Troubled Asset Relief
Program, the attorneys general of 11 states said it would be
best to collaborate on the matter.

"Despite a pledge to Congress of cooperation and
transparency, it remains unclear how much of the $165 million
in bonuses will be returned to the company and thus the
taxpayers who now own AIG," wrote New Jersey Attorney General
Anne Milgram, who has led the state coalition.

Attorneys general of Arizona, Delaware, Illinois, Kentucky,
Maine, Michigan, Mississippi, New Mexico, Ohio and Texas also
signed the letter.

An AIG spokeswoman said the company provided authorities
with information on its compensation programs and will continue
talking with them.

Barofsky did not immediately respond to requests for
comment.

AIG had awarded the bonuses in its financial products unit,
where losses tied to credit default swaps led to a $99.3
billion loss for the New York-based insurer in 2008.

The state coalition had been cooperating with New York
Attorney General Andrew Cuomo, whose separate probe spurred
some AIG officials to return their bonuses.

In the letter, Milgram suggested that AIG may have been
telling only "half-truths" about the bonuses.

She noted that in March AIG told Congress it had paid $120
million of bonuses overall, and then two months later said the
amount was actually $454 million.

Such discrepancies, she wrote, "raise serious questions
about the completeness of AIG's characterizations of its
financial condition."

AIG was once the world's largest insurer by market value.
It is trying to sell businesses and shed toxic debt to help
repay the government.

Shares of AIG shares rose 6 cents or 4.1 percent to close
at $1.53 on the New York Stock Exchange.
(Reporting by Jonathan Stempel; editing by John Wallace and
Matthew Lewis)