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Spitzer Files Lawsuit Against AIG

New York State Attorney General Eliot Spitzer has filed a civil lawsuit against AIG accusing the company and former chief executive officer Maurice Greenberg of...
June 1, 2005

New York State Attorney General Eliot Spitzer has filed a civil lawsuit against AIG accusing the company and former chief executive officer Maurice Greenberg of using "deception and fraud" to boost the company's stock price. Also named in the suit is former AIG Chief Financial Officer Howard I. Smith.  Greenberg and Smith 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."

Joe Norton, director of public relations for AIG, said the company has reviewed the complaint and is pleased the attorney general noted the company's continued cooperation in the investigation. "There are no new claims raised in the complaint," he said, adding Spitzer has "previously indicated his expectation of reaching a civil settlement with AIG." These was no immediate comment from spokesmen for Greenberg.

Meanwhile, sources quoted by the Wall Street Journal and the New York Times say a grand jury is probing potentially criminal conduct by individuals at AIG, including former top management. Spitzer and his staff have refused to confirm or deny that a grand jury is dealing with the case.

In its much-delayed annual report released on Tuesday May 31, AIG said that it increased its reserves for asbestos and environmental exposures by $850 million in the fourth quarter of 2004. The company reported $1.51 million in net reserve for losses and loss expenses at the end of 2004 related to asbestos and environmental claims. AIG on Tuesday said it had overstated net income for the past five years by $3.9 billion, or 10 percent, as it struggles to clean up past errors.

N.Y. Sues AIG Over Accounting Practices (National Underwriter 5/26/05) 

AIG Overstated Three Years of Net Income by $3.9 Billion (Reuters 5/31/05) 

AIG Seen Settling With Authorities Soon (Reuters 5/31/05)

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