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Mercury General Corporation Message Board

  • knowin_the_ins_game knowin_the_ins_game May 27, 2005 4:53 PM Flag

    Move over former Enron Execs

    You're going to have some company.

    New York sues AIG, ex-chief for fraud REUTERS [ FRIDAY, MAY 27, 2005 09:48:56 PM]

    NEW YORK: New York authorities on Thursday filed a civil lawsuit against insurer American International Group (AIG), its former chief executive, Maurice �Hank� Greenberg, and its former chief financial officer, saying they committed fraud and manipulated the books.

    The suit says Greenberg and former CFO Howard Smith, who were ousted when the investigation first picked up steam, took part in numerous fraudulent business deals that exaggerated the strength of the company�s core underwriting business and propped up its stock price.

    In the first legal action by regulators concerning AIG�s recently acknowledged accounting errors, New York attorney general Eliot Spitzer and New York insurance superintendent Howard Mills cited a pattern of fraud at the company, the world�s biggest insurer by market value. �The former top management routinely and persistently resorted to deception and fraud in an apparent effort to improve the company�s financial results,� Spitzer said in a written statement.

    Company shares rose 3% after the announcement as relieved investors found the complaint in line with earlier information already known about the case. For damages, the complaint does not give a dollar amount, but asks for punitive damages, the payback of any gains and restitution to anyone hurt by the fraud described.

    AIG in a statement said the complaint contained no new claims, adding, �We are pleased that attorney general Spitzer has recognised our cooperation and has previously indicated his expectations of reaching a civil settlement with AIG�.

    Lawyers for Greenberg said they were reviewing the complaint. �We will respond in due course denying any fraudulent conduct by Mr Greenberg,� his legal team said in a statement.

    Andrew Lawler, an attorney for Smith, said his client �Looks forward to the opportunity to answer and refute the allegations in court�.

    The company remains under investigation by Spitzer, the Securities and Exchange Commission and several state insurance regulators over its accounting irregularities.

    The civil complaint, filed in New York state supreme court, cites e-mails and other evidence showing Greenberg was personally involved in negotiating fraudulent deals and directed AIG staffers to help put together other misleading transactions.

    �It�s not anything shockingly bad,� said Williams Capital Group analyst Peter Streit of the complaint. �It appears the attorney general is trying to put a lot of the blame on Hank Greenberg himself,� he added.

    Also on Thursday, Ohio attorney general Jim Petro sued Greenberg to put a hold on the transfer of more than 41m shares worth over $2.6bn to his wife, Corinne Greenberg. Early this month, AIG detailed a long list of accounting and other improprieties and said it would restate nearly five years of financial results, slashing $2.7bn from its net worth.

    In its statements, AIG has disclosed a range of improper accounting moves, including overstating investment income, masking underwriting losses, and valuing assets too highly.

    The civil complaint stems from an investigation that came to light February 14 of a deal between AIG and General Re, a unit of Warren Buffett�s Berkshire Hathaway, that boosted AIG�s reserves yet was not correctly accounted for.

    Newspapers reported last week that a New York grand jury is considering criminal charges against one of more AIG staffers in the investigation.

    AIG is expected to file its much-delayed 10-K annual report with securities regulators early next week. � Shares of AIG rose $1.63 to close at $55.71 on the New York Stock Exchange on Thursday

55.00-0.53(-0.95%)1:08 PMEDT