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May 26, 2005 at 08:00 PM
Regulators have filed a civil suit in a state court in New York that accuses American International Group Inc. of using improper accounting practices to inflate its earnings.[@@]
New York Attorney General Eliot Spitzer and New York Insurance Superintendent Howard Mills allege in the complaint that AIG, New York, “engaged in misleading accounting and financial reporting, projecting an unduly positive picture of AIG’s underwriting performance for the investing public.”
The defendants named in the suit include AIG, former AIG Chairman Maurice Greenberg and former AIG Chief Financial Officer Howard Smith.
New York officials say AIG and AIG executives:
o Engaged in “2 sham insurance transactions” that gave investors the impression the company had larger reserves for claims than it did. Officials say the transactions were negotiated and approved by Greenberg.
o Hid loses from its underwriting business by converting the underwriting losses into capital loses.
o Created false underwriting income that involved false reporting of income from the purchase of life insurance policies as underwriting polices. This move was approved by both Greenberg and Smith, officials allege.
