Thursday, May 26, 2005

Spitzer Files Civil Suit Against AIG, Greenberg, and Smith

New York Attorney General Eliot Spitzer and state Superintendent of Insurance Howard Mills filed a civil suit alleging fraud, violation of the state securities law (Martin Act), and violation of the state Insurance law against American International Group, former CEO Maurice Greenberg, and former CFO Howard Smith (summons & complaint here).  The suit had been widely anticipated, and it contains no new allegations that have not already been aired in the press and discussed by the company as part of its internal investigation.  A press release issued by Spitzer's office (here) summarized the allegations involving AIG:

  • Engaged in sham transactions with a reinsurance company to create the appearance of insurance reserves where none existed. These deals were personally conceived and negotiated by Greenberg;
  • Hid underwriting losses from an auto warranty unit by transferring the losses to an off-shore entity that it secretly controlled; Papered over losses in a Brazilian subsidiary by linking the losses to a Taiwanese subsidiary;
  • Created false underwriting income derived from the purchase of life insurance policies; and
  • Repeatedly deceived state regulators about AIG’s ties to off-shore entities.

The suit also cites a separate scheme in which AIG improperly booked worker’s compensation premiums as general liability and other coverage. This misconduct reduced the company’s taxes and other assessments.

No word on the status of the criminal investigations by Spitzer's office (see earlier post here) and the Department of Justice.  The SEC usually coordinates its civil actions with the U.S. Attorney's Office, so I expect that the Commission will hold off for now pending decisions on whether to pursue federal charges against individual executives. An AP story (here) discusses the filing. (ph)

http://lawprofessors.typepad.com/whitecollarcrime_blog/2005/05/spitzer_files_c.html

AIG, Civil Enforcement, Fraud | Permalink

TrackBack URL for this entry:

http://www.typepad.com/services/trackback/6a00d8341bfae553ef00d835118b7d53ef

Listed below are links to weblogs that reference Spitzer Files Civil Suit Against AIG, Greenberg, and Smith: