AIG's Cassano the Subject of a Criminal Probe?
Spitzer Seeking to Reclaim a Bit of His Legacy
AIG Post-Bailout Extravagance Investigated
A.I.G Officially Bailed Out
Yeah. Man, I miss this guy,
Labels: AIG, Eliot Spitzer
SEC Stalking Maurice Greenberg in AiG Case?
AIG Sues Former CEO Hank Greenberg over $20 Billion in Stock
To the tune of $85 billion...
"But the bailout is likely to prove controversial, because it effectively puts taxpayer money at risk while protecting bad investments made by A.I.G. and other institutions it does business with."Ahem...yeah
General RE Execs Convicted on Reinsurance Agreements with AIG
More on the General Re Trial
Is there no honor
among thieves? At issue are shares of AIG subsid, Starr International Co. that Greenberg, along with six other AIG execs allegedly used as their personal money-pot
Labels: AIG, Hank Greenberg, lawsuit
Good stuff from the Hartford Courant.
General Re Ordered to Turn Over Internal Docs
The big sexy question is whether Warren Buffet himself with be called to testify.
Labels: AIG, Berkshire Hathaway Warren Buffet, General Re
Not exactly good news for Team Warren Buffet
Justice Department Bid-Rigging Investigations Hits Major Banks, Insurance Companies
. The records have been requested in connection with the criminal prosecution - and looming trial - of General Re's former chief executive, Ronald Ferguson.
Labels: AIG, Berkshire Hathaway Warren Buffet, General Re, Ronald Ferguson
Former AIG VP Indicted on Fraud Charges
AIG, Bank of America and JPMorgan Chase have all become enmeshed
in a Department of Justice Antitrust investigation into bid-rigging relating to municipal bond proceeds. While these three firms would be the big names, more than two dozen banks, insurers and brokers have either received subpoenas or been raided by federal authorities in the probe. At issue is whether laws we broken in the process of arranging bids for guaranteed investment contracts. Marketwatch describes it thusly
GICs guarantee institutions a certain rate of return on specific amounts of money. Providers promise to pay an agreed rate and get the money to invest in return. Profits are made on the spread between the rate the provider offers the buyer and the returns it can generate itself.
Municipalities often use GICs when they get large sums of money from a recent bond offering, but don't want to spend the cash straight away. Municipalities often ask brokers to help them track down the most attractive GICs.
"The investigations appear to be centered on broker activities in the municipal GIC market," said Thomas Abruzzo, managing director at rating agency Fitch and senior credit analyst for financial guaranty companies. "We don't anticipate that this will create problems for GIC providers, but that depends what things might be uncovered. It's an ongoing investigation and the story only started snowballing this week."
tagged in the investigation include: CDR Financial Products, Investment Management Advisory Group Inc. Sound Capital Management Inc., IXIS Corporate & Investment Bank, First Southwest Co., Genworth Financial Inc., XL Capital Ltd., Financial Security Assurance Corp, FGIC Corp. and former parent company, General Electric Co. have all either been paid a visit received a love letter from the DOJ.
Labels: AIG, Department of Justice
AIG Nearing Settlement with Regulators?
Christian Milton, AIG's former vice president for reinsurance has become the first AIG senior exec. to be charged in the accounting fraud probe that rocked the insurance giant.
More at The Street
Disney Directors Found Not Personally Liable, Aberration or Turning of the Tide?
$1.5 billion? That's the word on the street - Wall Street, that is. But the tab doesn't appear to come with a free pass for Greenberg:
AIG may pay up to $1.5 bln in settlement: report
Herald News Daily
January 13, 2005
American International Group Inc. may pay as much as $1.5 billion to settle civil investigations by state and federal authorities into an accounting scandal, The Wall Street Journal said Friday, citing sources familiar with the matter.
New York Attorney General Eliot Spitzer and the New York State Insurance Department filed a civil suit against the largest U.S. insurance company and its former chief executive, Maurice "Hank" Greenberg, last May, charging them with misleading investors by using improper accounting. A settlement is likely in two or three weeks and would include a deal with the Securities and Exchange Commission , a source familiar with the matter told Reuters. The agency declined to comment.
AIG spokesman Chris Winans declined to comment on the report other than to say, "We continue to cooperate with all our regulators." Talks are ongoing, a spokesman for Spitzer said, but it is too early to speculate on the terms of any settlement. "We‘re in no position to comment," he said.
A settlement of $1.5 billion would nearly equal the $1.57 billion in losses from Hurricanes Katrina and Rita that AIG suffered in the third quarter. A settlement would put an end to the lawsuit against AIG but would not include a deal with Greenberg or former AIG Chief Financial Officer Howard Smith, The Wall Street Journal said. Greenberg and Smith have denied any wrongdoing.
Settling for $1 billion would represent about 25 cents per AIG share after taxes, Wachovia Securities analyst John Hall said in a research note Friday, and 1 percent of AIG‘s book value. The cost rises to 38 cents a share if the settlement is not deductible.
"We had been projecting AIG‘s regulatory settlement would total roughly $550 million," Hall said. "While considerable, we don‘t believe the divergence between our expectation and the reported settlement will have a material effect on AIG‘s financial position." AIG shares were down 24 cents to $70.02 in midday dealings on the New York Stock Exchange , trading at about 2.04 times book value, which is relatively high for the sector.
Since February 11, 2005, the trading day before the company said it had been subpoenaed concerning investigations of products that might help companies smooth earnings, AIG shares have fallen about 4 percent, while the S&P insurance index has risen about 10 percent.
Any SEC settlement would have to be reviewed by the agency‘s five commissioners later this month, The Wall Street Journal said. Terms of the deal could change in that time, but parties are negotiating a payment of about $1.5 billion, it said.
The SEC has not brought a lawsuit against AIG, but the federal regulatory agency is expected to file and settle civil charges on the same day, if a deal can be reached. The civil suit against AIG and Greenberg by Spitzer and the New York State Insurance Department accused them of fraud and cooking the company‘s books. Smith was also named as a defendant.
The suit alleged that Greenberg and Smith, who were ousted as the investigation picked up steam, took part in numerous fraudulent business deals that exaggerated the strength of AIG‘s underwriting business and propped up its stock price. In addition to a fine, a settlement is likely to make formal a number of corporate governance reforms, some of which AIG has already put in place, the newspaper report said.
Citing sources close to the AIG board, it said AIG is weighing three new director candidates. While interim Chairman Frank Zarb has said he will stay in the job until AIG‘s annual meeting in May, the newspaper said he could stay up to an additional six months if a successor is not in place.
The original article appears here
Labels: AIG, Eliot Spitzer, General Re, New York AG
Former SEC Chair, Arthur Levitt to A.I.G. As Advisor
Disney suit altered the legal landscape
August 11, 2005
Just over two years ago, shareholder activists still reeling in the wake of the corporate meltdowns at Enron and WorldCom celebrated a decision by Judge William Chandler that they believed would herald a new era of accountability in US boardrooms.
By ruling that investors could bring a case against Disney's board for approving a $140m severance package for Michael Ovitz, fired after just 14 months as Disney president, Judge Chandler was sending a distinct message: directors could be held personally liable if they failed to live up to their fiduciary responsibilities. The decision was unique, in part, because it did not require directors to have personally benefited from poor decision to hold them financially accountable.
The 2003 ruling reverberated far beyond the Disney case, creating a legal landscape that encouraged investors in companies ranging from Hollinger to AIG, the insurance giant, to mount legal challenges against boards after allegations of corporate malfeasance, and boardroom acquiescence.
But the 2003 shareholder victory, which simply allowed the case to go to trial, hit a snag on Tuesday, after Judge Chandler ruled that the Disney board could not be held liable for approving Mr Ovitz's severance package.
Corporate governance experts yesterday said Judge Chandler's ruling was not, ultimately, as signficant as his decision to allow the case to be heard in the first place. "This affects everything. The issue was the standard of law that [Chandler] created and that he allowed it to go to trial," said Charles Elson, head of the Weinberg Center for Corporate Governance at the University of Delaware. Mr Elson says that the Chandler decision does raise a high bar for monetary liability for directors, but also "opens a door" for shareholders by creating a duty of good faith.
Robert Curry, a member of the Board of Advisors of Columbia Law School's Center on Corporate Governance, said Judge Chandler, in emphasising that his finding that the Disney directors acted in good faith was dependent on the unique facts of the case, made it easier for shareholders in the future to be heard when challenging actions of their directors.
The Disney case also contrasts another lesser-known ruling in Delaware last year, when Judge Jack Jacobs ruled that a director of a US Virgin Islands-based telecoms group, Emerging Communications, was personally financially liable for approving a transaction that was not in the interest of investors because he knew "or at the very least had strong reason to believe" that the price was unfair.
In making his judgment, Judge Jacobs ruled that the director's "specialised financial expertise" he had previously worked as a securities analyst for Lazard and Gabelli & Co meant that he had "consciously and intentionally disregarded" his responsibilities.
Original article appears here
Labels: AIG, Enron
Kroll Worldwide - A Private C.I.A.?
Via CNN Money
AIG hires ex-SEC chair as adviser
July 5, 2005
NEW YORK (Reuters) - American International Group, the world's largest insurer by market value that is battling through an accounting scandal, said Tuesday it had hired former U.S. Securities and Exchange Commission Chairman Arthur Levitt.
Levitt has been named a special adviser to its board of directors and the board's nominating and corporate governance committee. Levitt's duties will include advising on potential nominees for election to the board, as well as board procedures, structure and issues of governance.
"He will advise AIG on a wide range of corporate governance matters, work with AIG as it seeks to recruit the best qualified directors to represent all AIG shareholders and assist AIG as it reaches out to all of its shareholders," said AIG President and Chief Executive Martin Sullivan.
Levitt, who was the SEC's longest serving chairman with eight years at the helm, has extensive experience working on Wall Street and is joining AIG just as it begins to emerge from several months of bad news related to its management, accounting and other regulatory matters.
Full article appears here
Levitt's SEC bio can be found here
. Other notable Levitt associations include The Carlyle Group
, Risk Metrics
AIG's Ship Still Sinking in Ever Rougher Water
How the world's largest investigative firm came to be so, and then got itself wrapped up in the spectacular fall of Marsh & McLennan...
Via the Sydney Morning Herald
Welcome to the murky world of Kroll Inc - the private CIA
By Ben Hills
June 25, 2005
They helped track down billions of dollars of treasure looted from Kuwait by Saddam Hussein. They finally proved that "God's Banker", Roberto Calvi, found hanging under London's Blackfriars Bridge with bricks in his pockets, was murdered. They were hired by Prince Charles to find the "Princess Di tapes".
Move over James Bond, this is the real-life fantasy world of the thousands of former cops and spooks, bodyguards, forensic accountants, journalists and criminal lawyers who made up what claims to be "the world's foremost independent risk consulting company", Kroll Inc.
Not for nothing did a former executive of the company describe Kroll as "like a private CIA".
"Of course, there's lots of boring stuff too - corporate profiles, background checks on employees, data recovery," says a rival in the business, "But these are the ones that get the adrenaline going."
In the process, inevitably for a company employing large numbers of former CIA, FBI and Special Forces people, the company has occasionally been accused of misconduct - the bugging scandal in Brazil is just the latest in which Kroll Inc has been embroiled.
Founded in 1972 by a New York assistant district attorney, Jules Kroll, the company expanded aggressively across America and internationally into 60 countries. In Australia, Kroll formed an ongoing partnership with the accountancy firm Ferrier Hodgson.
Its customers were a who's who of the business world: Ford, Citibank, Hilton hotels, drug company Pfizer and Nestle among them. It has also worked for the US government.
Although its bread and butter work was legal corporate intelligence, such as profiling takeover targets, in countries such as Brazil, and now Iraq, where kidnapping is rampant, Kroll also specialised in "close body work" - bodyguards, protection and ransom.
In May last year, Julius Kroll received an offer he could not refuse. Marsh & McLennan, the New York insurance broker which claims to be the world's largest, took over Kroll for an eye-popping $US1.9 billion ($2.46 billion), more than $US100 million of which was pocketed by its founder.
Capitalised at $US6 billion, and with 60,000 employees in more than 100 countries - including Australia - Marsh & McLennan was the colossus of the industry, claiming a 40 per cent share of the global market for insurance broking.
But the company saw insurance as a mature market and wanted to expand into the related risk-management industry. No one could have foreseen when the takeover deal was signed in May last year that the sky was about to fall in.
Last October, New York's crusading district attorney, Eliot Spitzer, filed suit against Marsh & McLennan, accusing the company of having, for years, colluded with big insurance companies to "cheat customers in an elaborate charade of price fixing and bid rigging".
The three insurers he named were the giants American International Group, Zurich America Insurance Company and Ace Ltd. Adding spice to the story was the relationship between them: AIG was headed by the 79-year-old insurance industry legend Maurice "Hank" Greenberg; his son Jeffrey ran Marsh & McLennan, and; another son, Evan, was boss of Ace.
Spitzer claimed that Marsh & McLennan jacked up insurance premiums - thus increasing its commissions, and the profits of the insurers - with "fake bids, collusion, improper steering of business, payments by insurers to avoid solicitation of competing of competing quotes, and threats against those resisting participation in the fraudulent schemes".
The company "acted, in short, less like a broker with a fiduciary obligation to its clients than as the linchpin of a racket", Spitzer said.
Marsh & McLennan's shares tumbled more than 25 per cent, despite pledging it was "committed to getting all the facts, determining any incidence of improper behaviour and dealing appropriately with any wrongdoing".
Jeffrey Greenberg was forced to resign. His replacement was a man the company had inherited a few months earlier when it took over Kroll Inc, Michael Cherkasky, who was uniquely placed to steer the company through the scandal which threatened to destroy it.
For 16 years, Cherkasky was a white-collar crime buster for the New York District Attorney's office; Spitzer, now prosecuting Marsh & McLennan, was his protege. In 1994, Cherkasky joined Kroll - gamekeeper become poacher - working his way up to the chief executive's office.
Within three months, Cherkasky had overseen a clean-out of Marsh & McLennan's board, and the sacking of most of the executives deemed accountable for the corruption. In January, he persuaded Spitzer to drop the civil charges against the company by pledging to pay $US850 million to clients around the world - including Australia - that Marsh & McLennan had defrauded.
Criminal charges are still pending against 10 former executives of Marsh & McLennan and the insurance companies. In February, Kathryn Winter, the 50-year-old managing director of Marsh Inc, pleaded guilty to fraud in the Manhattan State Superior Court. She faces up to four years' jail, depending on how keenly she co-operates with Spitzer's investigators.
Cherkasky personally apologised to 120 of his biggest clients, and showed thousands of staff the door in a bid to restore the ailing giant to profitability.
He is now engaged on an even greater challenge - to convince outraged clients who had been deserting the company in droves, that Marsh & McLennan is serious about its reforms.
Original article appears here
Labels: AIG, background checks, Eliot Spitzer, Kroll
Three Strikes for General Re...Another Executive Receives Wells Notice
The bad news continues for reinsurance giant, A.I.G.
Former chairman and chief executive Maurice "Hank" Greenberg has resigned
from the company board and New York Attorney General.
Eliot Spitzer filed a civil suit against A.I.G. executives in May and is readying a Grand Jury
to pursue his continuing investigation for the insurance firm and its executives.
The company is also facing lawsuits from investors
who claim they were defrauded by company management.
Meanwhile, the A.I.G. whirlpool looks to take down executives from KKR
and Berkshire Hathaway
- both entities particupated in suspect transactions with AIG and the extent of their culpability has yet to be determined.
Now, it appears a prominent A.I.G. exec, Joseph Umansky (who was head of AIG's reinsurance division that is the principal focus of investigation), has secured immunity in a deal to testify for prosecutors regarding possible criminal charges that may be brought against former CEO Hank Greenberg.
Via the Sydney Morning Herald
AIG executive rolls for Spitzer
June 9, 2005
A former American International Group senior executive may spill the beans on the controversial reinsurance deals of Warren Buffett's company. Joseph Umansky was once known inside the company as a troubleshooter. In the sprawling, multi-tiered investigation of AIG and former top executives, he may be a source of trouble.
Mr Umansky was a senior vice-president in the corporate division of the insurer AIG and president of AIG Reinsurance Advisers, a reinsurance unit. Part of the inner circle of executives who dealt closely with the former chief executive, Maurice Greenberg, he was intimately involved in many of the deals that regulators and AIG itself have found to be improper.
Mr Umansky is to co-operate with New York attorney-general Eliot Spitzer in exchange for immunity. That complicates a parallel investigation by the Justice Department and the Securities and Exchange Commission.
Read the full article here
Labels: AIG, Eliot Spitzer, General Re, New York AG
Another Wells Notices Received in General Re Investigation
Via the International Herald Tribune
3rd General Re official faces a fraud complaint
By Timothy L. O'Brien The New York Times
MAY 12, 2005
The U.S. Securities and Exchange Commission has notified a third executive of General Re that he faces a civil fraud complaint as part of an investigation of financial manipulation in the insurance industry, according to a person briefed on the matter. The executive, John Houldsworth, was the head of General Re's office in Dublin. Houldsworth has been in the middle of several questionable transactions that have drawn the attention of regulators in the United States and other countries. While he still holds a senior position in Dublin, he no longer manages the office.
Separately, the pension fund TIAA-CREF said on Tuesday that its chief financial officer, Elizabeth Monrad, had requested and been granted an unpaid leave of absence to respond to a regulatory action against her. The SEC notified Monrad last Thursday that it planned to file a civil fraud complaint against her in connection with a questionable transaction between her former employer, General Re, and American International Group, according to a person briefed on the matter. Both General Re and AIG are targets of investigations into fraudulent insurance practices. Both are cooperating with the inquiries.
Last week, the SEC also notified a current General Re executive, Richard Napier, that it planned to file a civil fraud complaint against him in connection with the AIG transaction, according to two other people briefed on the matter.
Read the rest here
Labels: AIG, General Re
The Daily Caveat
Berkshire Hathaway Under Investigation by SEC
wrote yesterday about the ramp up of an SEC investigation in Berkshire Hathaway's
subsidiary , General Re - specifically a re-sinsurance deal involving General Re
and embattled insurer, American International Group
Former General Re-er and current TIAA-CREF
CFO, Elizabeth Monrad
has become the second company exec to receive a dance card invite from the SEC. Monrad requested and has been granted a leave of absense (unpaid) from TIAA-CREF (which has has been dealing with its own embarassing situation
of late) to address the SEC notice.
Current head of TIAA-CREF's internal audit functions, Russell Noles
, will be stepping into Monrad's shoes as interim CFO.Last week
General Re, senior vice president Rick Napier was received his own Wells Notice. The SEC claims that Napier assisted AIG in falsifying accouting records. Monrad's notification is reported to involve her potential role in alleged the cover-up.
And for a refresher on how these two execs came to be implicated, check out this April 2005 New York Times article
, courtesy of the Hendersonville Times
Labels: AIG, background checks, General Re
A.I.G Admits Overstating Value By Billions
Via CNN Money
SEC Reportedly Mulling Fraud Action Against Gen Re Exec
May 7, 2005
NEW YORK -- The Securities and Exchange Commission is considering filing a civil securities-fraud complaint against Rick Napier, an executive at Berkshire Hathaway Inc.'s (BRKA) General Re unit, for helping American International Group Inc. (AIG) improperly account for a reinsurance transaction, according to a person familiar with the SEC action.
Berkshire disclosed Friday the SEC served its so-called Wells notice to a senior vice-president of General Re on Monday and that the regulator could " bring a civil injunctive action and seek penalties against the individual, alleging that the individual violated or aided and abetted" securities laws. Berkshire, which didn't name the executive, couldn't be reached over the weekend.
Labels: AIG, General Re
A.I.G.'s Greenberg A Babe in the Woods?
Via the Times UK Online
AIG admits overstating book value by £2.7 billion
Abigail Rayner in New York
THE accounting scandal at AIG, the world’s biggest insurance company, intensified yesterday as it admitted to discrepancies that reduced its true value by $2.7 billion (£1.4 billion).
AIG revealed “material weaknesses” in its control systems and said that executives had at times been able to “circumvent” its internal accounting controls. Transactions had been “misrepresented”, it added.
Adding to its woes it said that its own auditors, PricewaterhouseCoopers, would be issuing an “adverse opinion” on its controls.
The admission of discrepancies was contained in an 11-page statement in which AIG also said it would miss its self-imposed deadline for filing its annual results.
For the rest of the article, click here
With Cutler Saying Goodbye, Who's Next at the SEC?
Not so according to David A. Andelman at Forbes.com
. He takes issues with Greenberg's newfound assertions of naivety based on personal experience with the insurance industry exec.
Case in point:
To suggest today that Greenberg had no real knowledge or understanding of any insurance product on his watch at this company that he ran with an iron fist for 35 years seems, at least to someone who has witnessed how he works closeup, a trifle naive. Indeed, if the numbers of various prosecutors circling AIG and the Fifth Amendment pleadings by its top executives are any indication, perhaps criminally naive. We'll see. Indeed. More at Forbes.com.
But it seems doubtful that the annual report was the only item Greenberg micromanaged. At AIG, he had a hand in virtually every new and innovative insurance product that launched from the moment he took control of the small property-casualty operation with its roots in Shanghai. There were even taxi vouchers for his executives that he scrutinized to the finest detail.
That was how Greenberg built the insurance company, which had a $13 million profit when he took charge as CEO in 1967, into a global giant with $11 billion in earnings on a stunning $100 billion in revenue last year--more than the gross national product of OPEC-member Venezuela. His attention to detail was legendary.
Now all of this may be coming back to bite him where it hurts.
And for more on the on-going investigation into A.I.G., check out the latest post from peter Henning at the White Collar Crime Prof. Blog.
Labels: AIG, Peter Henning
A Black Eye for "America's Most Respected Investor"
Wall Street Needs A New Cop
NEW YORK - As Stephen Cutler prepares to step down as the top cop at the U.S. Securities and Exchange Commission, he leaves behind an intensifying investigation into the insurance industry but a sense that an era of corporate scandal is winding down.
Cutler said today he would leave in the next month after three and a half years as director of the SEC's enforcement division, which acts as the watchdog of Wall Street. It has been among the most tumultuous periods in corporate America. As director, he levied more than $6 billion in penalties and disgorgement, targeting Enron, Adelphia Communications (otc: ADELQ - news - people ), Qwest Communications (nyse: Q - news - people ), Tyco International (nyse: TYC - news - people ), WorldCom (nasdaq: MCIP - news - people ), Time Warner (nyse: TWX - news - people ) and others.
Earlier this week, Cutler finalized a multiyear investigation into trading practices by specialists on the New York Stock Exchange, bringing civil charges against 20 individuals and scolding the NYSE for failing to police those traders, who are supposed to make efficient markets in listed stocks.
Already today, there was speculation that Linda Thomsen, a highly regarded longtime SEC prosecutor and Cutler's deputy, would be named interim enforcement director, if not his outright successor. An SEC spokesman declined to comment.
Naming Thomsen would "send a powerful signal that the chairman wants continuity," says Joel Seligman, a professor of corporate law at Washington University's School of Law. "It would be seen as disquieting to bring someone in from the outside."
Cutler joined the agency as deputy director of enforcement in 1999. Before that, he was a partner in the Washington firm Wilmer, Cutler & Pickering. He has not said where he is headed, though the announcement said he planned to return to private practice.
Just weeks after he became director in 2001, Enron, a Houston energy firm that was once the seventh-largest U.S. company, collapsed into bankruptcy amid allegations of massive accounting fraud.
Cutler worked often in tandem with New York State Attorney General Eliot Spitzer. Two years ago this week, the SEC and Spitzer announced a $1.4 billion settlement with ten Wall Street firms, including Citigroup (nyse: C - news - people ), Merrill Lynch (nyse: MER - news - people ) and Morgan Stanley (nyse: MWD - news - people ), and ordered them to put better controls on avoiding conflicts of interest between bankers and research analysts.
"It's been one of the most amazing times in the agency's history," says Charles Elson, a professor and corporate governance expert at the University of Delaware.
An investigation into transactions and accounting at American International Group (nyse: AIG - news - people ) is just under way, but observers said they didn't believe Cutler's departure from the SEC would interrupt that probe.
Cutler's departure "is certainly not sending us a signal that we can discern anything with regards to the AIG case," says Roy Smith, a professor at New York University's Stern School of Business.
A steady stream of earnings restatements in the last year will ensure that there is plenty of work for the SEC's enforcement division, but even Cutler suggested a lot of the heavy lifting is over.
In a speech last month, he said, "I do believe our enforcement approach is about where it needs to be--and is producing real results... I don't think we'll be seeing an enforcement docket three to five years from now that looks anything like the enforcement docket we have today."
The original article can be read here
Labels: AIG, Eliot Spitzer, Enron, Morgan Stanley, New York AG, Tyco
From the Guardian Unlimited
AIG admits 'improper' accounting in deals with Buffett group
Thursday March 31, 2005
American International Group, the world's biggest insurer, admitted yesterday that it had improperly accounted for a deal at the heart of a series of investigations.
The insurer said the agreement with General Re, a subsidiary of Warren Buffett's Berkshire Hathaway, had been wrongly characterised.
"Based on its review to date, AIG has concluded that the Gen Re transaction documentation was improper and, in the light of the lack of evidence of risk transfer, this transaction should not have been recorded as insurance," it said.
Berkshire Hathaway said this week that Mr Buffett, America's most respected investor, had not been briefed on the structure of the transactions between General Re and AIG or on "any improper use or purpose of the transactions". He is expected to talk to investigators in the next fortnight.
AIG said yesterday that improper documentation related to two transactions between AIG and General Re, each involving $250m (£133m). AIG said yesterday that the deals should have been accounted for as deposits.
Last month AIG acknowledged that it had received subpoenas from the New York attorney general, Eliot Spitzer, and the US securities and exchange commission relating to "non-traditional insurance products and certain assumed reinsurance contracts". The New York department of insurance is conducting inquiries into related matters.
The affair has already seen the departure of AIG's chairman and chief executive, Maurice "Hank" Greenberg. Mr Greenberg, who ran AIG for almost four decades, was forced to stand down as chief executive only two weeks ago and this week confirmed that he would quit his new role as non-executive chairman when he returned from a business trip in Asia. Three other executives have also left.
AIG said yesterday that it would have to delay further the release of its 2004 figures as it continued to investigate its records. It warned that shareholders' equity could be reduced by up to 2% and that it faced tax charges of up to $670m as a result of discoveries thrown up by the review.
AIG said it was reviewing the impact of fresh evidence of its relationships with a series of offshore companies with which it had done business.
It said it would have to consolidate the results of Richmond, a Bermuda-based reinsurance company, in which it holds a 19.9% stake, after finding "previously undisclosed evidence of AIG control".
It is also examining its relationship with the Barbados-based Union Excess. Though AIG has no direct stake in Union, it said yesterday that "a significant portion of the ownership interests of Union Excess shareholders are protected under financial arrangements with Starr International ... which owns approximately 12% of AIG's common stock and whose board of directors consists of current and former members of AIG management".
The original article can be found here
Labels: AIG, Eliot Spitzer, General Re, New York AG