Connecticut Sen. Chris Dodd bore the brunt of public criticism last week for the American International Group’s $218 million scandal regarding bonuses paid out to its employees.

The chairman of the Senate Banking Committee, Dodd faced stiff opposition from the media and constituents after he confirmed to CNN he was involved in including a loophole in last month’s federal stimulus bill. The loophole — which prevents existing executive contracts from being changed — allowed AIG’s contractual bonuses to be paid out, even though the company received more than $170 billion in public money. But despite his involvement, Dodd has denied any negligence or wrongdoing on his part.

AIG cited Connecticut wage law as reason for not withholding the bonuses, prompting an investigation by various state officials including Attorney General Richard Blumenthal LAW ’73, Consumer Protection Commissioner Jerry Farrell Jr. and state legislators.

Dodd admitted that he had approved the loophole at the behest of the Treasury Department, which was concerned about liability for breached executive contracts. Embattled Treasury Secretary Timothy Geithner confirmed to CNN on Thursday that his department did in fact raise concerns to Dodd’s staff but that he had not personally been involved.

“Treasury staff raised a general concern about broad legal challenges to the retroactivity of the amendment, including constitutional claims, but did not insist on any changes or receive any resistance from the senator’s staff,” Treasury spokesman Isaac Baker said in a statement.

This did not end the controversy, however. Dodd went on a media blitz late last week to reaffirm that he did not have any knowledge of the AIG bonuses when he made the change.

Governor M. Jodi Rell said in a statement last week she found the bonuses to be “disgraceful” and that she would seek to have them voided as “against public policy” under the Connecticut Unfair Trade Practices Act.

“Since the company cited Connecticut law, they will have to live by Connecticut law,” she said. “AIG has cited a provision in Connecticut law as the justification for paying these bonuses. I am hopeful that another Connecticut law — CUFTA — will enable us to void the bonus payments.”

Blumenthal struck a similar tone, saying he would intensively review the company’s claims.

“Taxpayers feel misled and manipulated,” he said. “We must fight, with every legal remedy available, to recapture every cent of these scarce taxpayer resources. AIG relied on contracts and Connecticut law as a flimsy and fatally flawed legal camouflage to reprehensibly enrich employees.”

Speaking with Connecticut reporters on a Thursday afternoon conference call, Dodd reaffirmed the Treasury Department’s influence.

“The idea came from the administration,” he said. “I was not negotiating with myself. I didn’t get my amendment passed and say, ‘I think I’ll modify my own amendment.’ ”

Yet Dodd still found himself fending off criticism that portrayed him as defending executives bonuses for federally bailed-out companies, including from a potential challenger — former Congressman Rob Simmons.

“He says one thing one day, one thing another day,” Simmons said to the Hartford Courant. “Where’s the transparency in all of this?”

Dodd’s press staff released a lengthy statement Friday, defending the senator’s statements of the previous week and his action on the subject, entitled: “Setting the Record Straight — Dodd’s Leadership on Curbing Excessive Executive Compensation.”

Blumenthal announced this weekend that his own review of the bonuses had shown that $218 million had been paid by AIG to executives, as opposed to the $165 million reported last week.

Several AIG executives, including CEO Edward Liddy, have been subpoenaed to testify before the Connecticut General Assembly’s Banks Committee later this week.