How many payoffs do you suppose were involved here? I would say quite a lot.
I don't think anyone was paid off. It wasn't illegal - and still isn't. It's a little complicated to get into in this format, but this wasn't ENRON. These were legitimate contracts and legitimate partnerships that made considerable money for at least some period of time.
It should also be pointed out that AIG primary business was INCREDIBLY well run and was profitable - and may even be profitable today. But, the exposure on all these bad insurance claims has just overwhelmed AIG. Not just on the payout side, but AIG has also been hurt by the cash reserve requirements imposed on them by US State and Federal regulators - regulations that coincidentally were a result of the ENRON debacle in 2000.