AIG and two former top executives engaged in fraudulent transactions designed to exaggerate...
AIG and two former top executives engaged in fraudulent transactions designed to exaggerate the insurer's financial results and pump up its stock price, according to a civil lawsuit filed yesterday by New York attorney general Eliot Spitzer and the state's insurance department.
The lawsuit, which charges fraud at the company dating back to the 1980s, names as defendants AIG, former chairman and chief executive Maurice Greenberg and former chief financial officer Howard Smith. The complaint was filed at the Supreme Court in Manhattan.
The charges claim AIG:
· engaged in transactions, personally conceived and negotiated by Greenberg, with General Re, a unit of Berkshire Hathaway, to create the appearance of insurance reserves where none existed
· hid underwriting losses from an auto warranty unit by transferring the losses to an offshore entity that AIG secretly controlled
· “papered over” losses in a Brazilian subsidiary by linking the losses to a Taiwanese subsidiary
· repeatedly deceived state regulators about AIG's ties to offshore entities
Spitzer said: “The irony of this case is that AIG was a well-run and profitable company that didn't need to cheat. 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.”
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