New York Attorney General Eliot Spitzer yesterday filed a civil suit against American International Group (AIG), accusing the nation's largest...
ALBANY, N.Y. — New York Attorney General Eliot Spitzer yesterday filed a civil suit against American International Group (AIG), accusing the nation’s largest insurance company and two former top executives of using “deception and fraud” to boost the company’s stock price.
The suit filed in state Supreme Court in Manhattan accused AIG’s former chief executive, Maurice Greenberg, and former chief financial officer, Howard Smith, of orchestrating an accounting scheme that made AIG’s financial picture appear brighter than it was, misleading investors and state regulators.
“The irony of this case is that AIG was a well-run and profitable company that didn’t need to cheat,” Spitzer said. “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.”
The 37-page suit accuses AIG of employing a variety of questionable accounting devices. The suit said, for example, that AIG “engaged in at least two sham insurance transactions” to give the impression its reserves were higher than they were.
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The suit also alleges that AIG concealed losses from insurance underwriting through offshore shell companies; mischaracterized income from the purchase of life-insurance policies; and repeatedly lied to state insurance regulators about its ties to offshore companies.
The suit suggests that Greenberg and Smith manipulated the stock for personal financial benefit.
“Greenberg and Smith … both held hundreds of thousands of shares of AIG stock. For example, the value of Greenberg’s holdings increased or decreased approximately $65 million for every dollar AIG stock moved,” the civil suit claimed.
Greenberg’s attorney, David Boies, didn’t respond to a request for comment and Smith couldn’t be reached for comment.
AIG spokesman Joe Norton said that AIG — operating under new management — was continuing to cooperate with investigators.
“There are no new claims raised in the complaint,” Norton said. “We are pleased that Attorney General Spitzer has recognized our cooperation and has previously indicated his expectations of reaching a civil settlement with AIG.”