American International Group will pay a record $1.64 billion to settle state and federal charges of securities fraud, bid-rigging and failure to pay proper contributions to various state workers’ compensation funds, state and federal regulators announced last week.
The settlement with New York Attorney General Eliot Spitzer, New York Insurance Superintendent Howard Mills and the Securities and Exchange Commission calls for changes in business practices by AIG.
Of the settlement money, regulators said $700 million will go to investors who were misled, $375 million to AIG policyholders hurt by bid-rigging and $344 million to the 50 states where AIG failed to make proper payments to workers’ comp funds by underpaying premium taxes and assessments.
New York and the SEC each assessed an additional $100 million in penalties against the company, with the SEC fine going into the defrauded investors’ fund.
In addition, the U.S. Justice Department said the company had agreed to pay $25 million to settle charges related to two improper transactions designed to pump up its financial statements.
In a statement acknowledging the misconduct, the company said it apologized for the activity that led to the civil suit brought by Spitzer and Mills. “Providing incorrect information to the investing public and to regulators was wrong and is against the values of our current leadership and employees,” AIG said.
AIG’s agreement with Spitzer ends the case against the company but leaves Maurice Greenberg, the company’s former chairman and CEO, and Howard Smith, AIG’s former chief financial officer, still facing New York state civil fraud charges.