Thursday, August 6, 2009
The SEC settled charges that former American International Group Chairman and CEO Maurice "Hank" Greenberg and former Vice Chairman and CFO Howard Smith were involved in numerous improper accounting transactions that inflated AIG's reported financial results between 2000 and 2005. The SEC alleged that Greenberg and Smith are liable as control persons for AIG's violations of the antifraud and other provisions of the securities laws. Smith also is charged with direct violations of the antifraud and other provisions of the securities laws.
The SEC alleged that Greenberg and Smith were responsible for material misstatements that enabled AIG to create the false impression that the company consistently met or exceeded key earnings and growth targets. According to the SEC's complaint, Greenberg publicly described AIG as the leader in the insurance and financial services industry with a history of delivering consistent double-digit growth. However, AIG faced numerous financial challenges under Greenberg's leadership that were disguised through improper accounting. The SEC previously charged AIG in 2006 with securities fraud and improper accounting, and the company settled the charges by paying disgorgement of $700 million and a penalty of $100 million, among other remedies.
Greenberg and Smith agreed to settle the SEC's charges and pay disgorgement and penalties totaling $15 million and $1.5 million, respectively.