The New York attorney general announced a lawsuit against the country’s largest business insurance company, AIG.
In the suit, Mr. Spitzer alleges that American International Group’s former management, including insurance industry legend and former chairman Maurice “Hank” Greenberg, engaged in numerous fraudulent business practices.
The company performed those actions not to disguise weakness in its underwriting business, but to exaggerate its strength. AIG was a successful company, not an enterprise desperate to keep itself going.
“The irony of this case is that AIG was a well-run and profitable company that didn’t need to cheat,” Mr. 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.”
Another top manager formerly with AIG, its chief financial officer Howard I. Smith, was also named in the suit.
State Insurance Superintendent Howard Mills said: “The charges against AIG and two of its former executives are serious ones and the complaint includes compelling evidence that investors and regulators were misled over an extended period of time.”
According to a press release, AIG executives allegedly created false insurance reserves through a fake reinsurance company; hid underwriting losses in an offshore entity controlled by AIG; and several other improper actions, some of which were personally overseen by Mr. Greenberg.
Motivation for the crime seems to be simple greed; enhancing the company’s stock value created wealth for Mr. Greenberg and Mr. Smith. Mr. Spitzer’s office says the investigation is continuing.
David Utter is a staff writer for Murdok covering technology and business. Email him here.
