Former AIG CEO agrees to pay $9m to settle accounting fraud case
Maurice Hank Greenberg, the former CEO of American International Group, has agreed to pay $9m to settle a 12-year-old accounting fraud case.
Along with Greenberg, the company's former CFO, Howard I. Smith, will pay $900,000 for his part in two fraudulent reinsurance transactions that formed the crux of the securities fraud suit filed under the Martin Act.
The announcement in this regard was made by The Office of Attorney General Eric T. Schneiderman in New York.
Schneiderman said: “The agreement settles the indisputable fact that Greenberg has denied for twelve years: that Greenberg orchestrated two transactions that fundamentally misrepresented AIG's finances. After over a decade of delays, deflections, and denials by Greenberg, we are pleased that Greenberg has finally admitted to his role in these fraudulent transactions and will personally pay $9m to the State of New York.”
Attorney General Eliot Spitzer had filed the lawsuit in the New York County Supreme Court in 2015 after AIG’s admission of being involved in certain improper reinsurance deals.
The questionable deals were known as the GenRe and Capco transactions which were done during the tenures of Greenberg and Smith.
Irregularities of the deals had misrepresented the insurance company’s loss reserves materially while misstating its underwriting results in the 2000-2004 period according to the lawsuit.
In 2006, AIG which started off as one of the original defendants in the lawsuit, reached a settlement by paying $1.6bn. However, Greenberg and Smith maintained their stance and denied any wrongdoings on their part until the latest settlement announced by Attorney General Eric T. Schneiderman.
The duo has accepted that they were personally involved in the sham transactions from initiation, participation and approvals. Greenberg and Smith have agreed to give up their performance bonuses in 2001-2004 totaling more than $9.9m for facilitating the deals.
Image: The AIG Towers of Los Angeles. Photo: courtesy of HanSangYoon and Wikipedia.