May 27, 2005 in Business

AIG sued by Spitzer for fraud

Michael Gormley Associated Press
 

ALBANY, N.Y. – New York Attorney General Eliot Spitzer on Thursday filed a civil suit against American International Group Inc., accusing the nation’s largest insurance company and its former chief executive officer of using “deception and fraud” to boost the company’s stock price.

The suit filed in state Supreme Court in Manhattan named New York-based AIG, former CEO Maurice “Hank” Greenberg and former AIG Chief Financial Officer Howard I. Smith.

They are accused of an accounting scheme that made AIG’s financial picture appear brighter than it was to investors and 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.”

AIG spokesman Joe Norton had no immediate comment. Greenberg’s attorney, David Boies, didn’t immediately respond to a request from comment and Smith couldn’t be reached for comment.

Meanwhile, a grand jury is probing potentially criminal conduct by individuals at AIG, including former top management, according to sources quoted in the New York Times and the Wall Street Journal.

Spitzer and his staff have refused to confirm or deny that a grand jury is dealing with the case.

AIG shares rose 72 cents to $54.80 in afternoon trading on the New York Stock Exchange. They have traded in a 52-week range of $49.91 to $74.98.

Greenberg, 80, resigned as chief executive officer and chairman of AIG in March, ending nearly 40 years at the helm of the insurance company. Smith was fired about a week later for failing to cooperate with investigators.

Called to testify last month before Spitzer’s staff, representatives from the Securities and Exchange Commission and lawyers from the New York state insurance department, Greenberg claimed his Fifth Amendment rights against self-incrimination, saying he had not been given access to AIG documents he needed for his defense.

State Insurance Superintendent Howard Mills said that the complaint “includes compelling evidence that investors and regulators were misled over an extended period of time.”

He added: “Having said that, however, I believe AIG’s current management team has taken steps to restore the company’s credibility.”

Greenberg was replaced as CEO by Martin J. Sullivan, 50, who had served as vice chairman and co-chief operating officer.

© Copyright 2005 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.


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