Spitzer is prosecuting Geenberg

Date:   5/27/2005 2:12:49 PM ( 19 y ago)

Spitzer Sues AIG, Greenberg, Smith

The suit cites e-mails and other evidence showing that the insurer's former chairman and CEO was personally involved in negotiating some of American International Group's fraudulent transactions, according to Spitzer.

Stephen Taub, CFO.com
May 27, 2005

New York State Attorney General Eliot Spitzer and New York State Insurance Superintendent Howard Mills have filed a civil lawsuit against American International Group Inc., former chairman Maurice Greenberg, and former chief financial officer Howard I. Smith. Spitzer and Mills accuse them of manipulating the company's financials in order to deceive regulators and investors.

The lawsuit also charges that Greenberg and Smith engaged in numerous fraudulent business transactions that exaggerated the strength of the company's core underwriting business to prop up its stock price.




"The irony of this case is that AIG was a well-run and profitable company that didn't need to cheat," Spitzer said in a statement. "And yet, the former top management routinely and persistently resorted to deception and fraud in an apparent effort to improve the company's financial results."

Mills cited "compelling evidence that investors and regulators were misled over an extended period of time." He did add, though, that "AIG is taking steps to restore the company's credibility."

The lawsuit, filed in State Supreme Court in Manhattan, places AIG's misconduct "directly to Greenberg," according to a press release.

The suit cites e-mails and other evidence showing that Greenberg was personally involved in negotiating some of the fraudulent transactions, and that he directed other AIG staffers to develop and implement the schemes underlying other misleading transactions, according to Spitzer.

The lawsuit asserts that AIG and its top management:

• Engaged in sham transactions — "personally conceived and negotiated by Greenberg" — with a reinsurance company to create the appearance of insurance reserves where none existed.

• Hid underwriting losses from an auto warranty unit by transferring the losses to an off-shore entity that AIG secretly controlled.

• Papered over losses in a Brazilian subsidiary by linking the losses to a Taiwanese subsidiary.

• Created false underwriting income from the purchase of life insurance policies.

• Deceived state regulators repeatedly about AIG's ties to off-shore entities.

The lawsuit also cites a separate scheme in which AIG improperly booked worker's compensation premiums as general liability and other coverage. According to Spitzer's office, this misconduct reduced the company's taxes and other assessments.

In addition to injunctive relief, the suit seeks damages and disgorgement of profits from the illegal transactions.

According to The Wall Street Journal, an AIG spokesman noted that "no new claims" are raised in the complaint. The company, as well as Spitzer, stressed that AIG is cooperating with authorities.

Spitzer spokesman Darren Dopp told Bloomberg that the attorney general's office expects to settle with AIG, but that "It's really hard to say when." Added Dopp, "The investigation is continuing and there could be others named in the suit."

In a related development, Ohio Attorney General Jim Petro sued Greenberg and his wife, Corinne, in order to freeze more than 41 million shares of AIG common stock — valued at more than $2.6 billion — that Greenberg to his wife as a "gift" two days before he stepped down as chief executive officer.

"We are seeking to stop this suspect transaction of a large block of stock and put it under the control of a receiver," said Petro in a press release. The Ohio Attorney General is pursuing a securities class action on behalf of the Ohio Public Employees Retirement System, the State Teachers Retirement System of Ohio, the Ohio Police and Fire Pension Fund, and AIG investors, the statement added.

9th- Greenberg had sons and/or a son in law at both Mercer and I believe Willis- two major risk indemnifying consultant firms that also sold product. I happen to like AIG product, but I wonder how much of AIG product was preferentially pushed through those channels?

I'm 99% positive the reason Greednberg was singled out is that he sees nothing wrong with his practices and therefore, has not cooperated with Spitzer. Kinda the "martha Stewart" syndrome. My problem; Geenberg "out in front of God and everyone" gifted a huge block ($2B-yes that's Billion*pinkie rises to the side of mouth*) of his AIG stock to his wife when it became clear he might be held personally accountable for his "schemes"- which were considered just "part of doing business" in the investing and risk indemnification world. In other words, some of the practices we have all been reading about, were considered par for the course-ethics or considering the consumer were not high on the list of considerations. Money and Profits; and apparently how much of those two you could stuff in your own pocket when you had the position and power to do so was at the top of the consideration list! And nothing has changed since Rome and before- But take heed -we will all pay for this, just as the innocents did when Rome fell!

 

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