New York Attorney General Eliot Spitzer today sued insurance giant AIG and its former boss Maurice 'Hank' Greenberg, accusing them of cooking the firm's books to deceive regulators and investors.
In a statement, the office of the crusading law officer named American International Group and Greenberg as defendants along with Howard Smith, AIG's former chief financial officer.
The suit accused them of engaging 'in numerous fraudulent business transactions that exaggerated the strength of the company's core underwriting business to prop up its stock price'.
'The irony of this case is that AIG was a well-run and profitable company that didn't need to cheat,' said Spitzer, who has made his name with a series of high-profile lawsuits against heavyweights of US business and Wall Street.
'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,' he said.
Spitzer said the 80-year-old Greenberg, who was in March forced out of the company that he ran for nearly four decades, was personally involved in the financial skullduggery.
He said the company and its former top management:
- conducted sham transactions with a reinsurance company 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 them to a Taiwanese subsidiary;
- created false underwriting income derived from the purchase of life insurance policies;
- pepeatedly deceived state regulators about AIG's ties to offshore entities.
