Sen. Chris Dodd for the first time Wednesday acknowledged he was instrumental in creating legislation that cleared the way for disgraced executives at taxpayer-rescued AIG to walk away with hundreds of millions of dollars in bonuses.

And the Connecticut Democrat had to explain the receipt of more than $100,000 in campaign donations last cycle from AIG workers, vowing to return any tainted contributions from company executives.

But the campaign contributions issue will be dwarfed by whether Dodd eased the way for huge executive bonuses at AIG. In an interview Wednesday afternoon, the senator said he had hoped an amendment he had drafted to limit executive pay under last year's Targeted Asset Relief Program would have ruled out hefty bonuses.

"I thought we covered that," Dodd said of the bonus issue.

His amendment had passed the Senate, but was later relaxed by the conference panel that works out differences between versions of legislation passed in the two chambers of Congress.

But later Wednesday, Dodd said he had agreed to change his amendment -- at the request of the Obama administration -- to ensure previously enacted bonus contracts would be honored despite billions of dollars awarded to bailout beneficiaries.

"I did not want to make any changes to my original Senate-passed amendment, but I did so at the request of administration officials, who gave us no indication that this was in any way related to AIG."

"The

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alternative was losing the amendment entirely," he told the network. Administration officials feared without the language the bailout measure would be deluged with lawsuits, Dodd said.

He did not name the administration officials in his statement,

Dodd's admission is likely to intensify the fever pitch in Washington, as politicians scramble to explain to an outraged public why they supported a bailout bill that granted huge bonuses to executives who had so mismanaged their companies.

Congress is looking at a number of methods to force those executives to give the money back, including taxing them.

"We're working on it," Dodd, the chairman of the Senate Finance committee, said.

The executives in the eye of the storm work for a Wilton-based division of AIG Inc., called AIG Financial Products, which is actually being closed down. AIG Financial Products played a pivotal role in the parent company's problems that prompted it to seek and receive more than $170 billion in government bailout money.

Connecticut state lawmakers also are looking at ways to take away the bonus money, which is being awarded to the executives as incentive to keep them on the job while the company sells off the financial products portfolios.

While Dodd worked with his colleagues to address the problem, he had to answer questions about more than $103,000 in donations he received from AIG Financial Products workers during the 2008 campaign.

The senator pledged to go through his list and give back or donate to charity contributions linked to bailout money. The bulk of Dodd's AIG money during the just-completed campaign season came from about a dozen AIG executives.

They include Douglas Poling, of Fairfield; Christopher Phole, of New Canaan; Steven Pike, of Stamford; Robert Powell, of Westport; Joseph Rooney, of Fairfield; Gregory Ruffa, of Darien; Christian Toft, of Weston; Steven Wagar, of Norwalk; Jonathan Liebergall, of New Canaan; Leonid Shekhtman, of Redding; and James Haas, of Fairfield.

Three of these executives, Poling, Haas and Liebergall, were outed as possible recipients of bonuses on Wednesday.

"I don't want those contributions," Dodd said of any that might be tainted. He said prior to the last year AIG was a solid and well-respected company.

Dodd is not the only beneficiary of AIG contributions.

Altogether, AIG executives raised $630,000 during the past election cycle, according to the Center for Responsive Politics, as the company was coming under fire. At least $120,000 of those contributions were made after September when Congress awarded AIG the first $85 billion of its federal bailout money. President Barack Obama's campaign received $101,000.

This is not the first time Dodd has found himself in this position of pillorying a corporate villain in one breath and in the next defending himself from claims he's too cozy with the same miscreant.

It was revealed last year that Dodd, who raged against abuses by the mortgage industry, had received a preferential loan for his home. And, as Senate finance chairman, eyebrows have continued to be raised about the contributions he has received from Wall Street firms.

Gary Rose, a Sacred Heart University professor of political science, said this could open the door for someone to challenge Dodd's hold on his Senate seat.

"It continues to raise the spectre of preferential treatment and it may not be true, but the perception, in politics, is reality," Rose said.

And Dodd will have to work hard to dispel public sentiment about government's relationship with big business.

Rose said Dodd has shown himself to be up to the challenge in the past, but overall he hasn't seen any real competition for the seat in the past.

"There have just been sacrificial lambs run against him," Rose said. But that could change in 2010 when he is up for re-election.

"It's one of the seats that will be targeted," Rose said.

Former U.S. Rep. Rob Simmons, a Republican, Sunday announced plans to challenge Dodd in the 2010 election.

Simmons lost re-election by less than 100 votes in the 2006 Democratic wave, but a recent Quinnipiac Poll gave him a 43 percent to 42 percent edge over Dodd.

Staff writer MariAn Gail Brown and the Associated Press contributed to this report.