Maurice “Hank” Greenberg, former CEO of American International Group (AIG) is being sued along with former CFO Howard Smith, by New York Attorney General Eliot Spitzer.
Spitzer filed a civil suit claiming that the Greenberg and Smith manipulated the company’s financial statements by recording fraudulent transactions, in an effort to mislead regulators and investors.
AIG’s lawyers are currently preparing to file the company’s annual report with the SEC. The company has until Tuesday to present the report, which has already been delayed 3 times. AIG said that the fraudulent financial reporting will reduce its value by as much as $2.7 billion. MSN Money explains a little about the accusations:
Mr Greenberg and Mr Smith were personally involved in arranging two “sham” reinsurance transactions with General Re, a reinsurer controlled by Berkshire Hathway that inflated AIG’s reserves, the complaint alleges.
Another was that the defendants allegedly hid losses from AIG’s underwriting business by converting underwriting losses to capital losses.
In a third alleged offence, the pair falsely reported the income from the purchase of life insurance policies as underwriting income.
“The AIGs of the world don’t want to get bogged down in a lawsuit with the attorney general of New York or the SEC for that matter,” said former federal prosecutor Jacob Frenkel. “But for an individual of Mr. Greenberg’s stature, the outcome of this case follows him for the rest of his life, which may make the desire for vindication greater.”
AIG shares went up 3% yesterday and today added another $1.02, or 1.8% reaching $56.73. The shares are the highest they have been since the end of March.
Chris is a staff writer for Murdok. Visit Murdok for the latest ebusiness news.
