Greenberg Settles With SEC

- Sham reinsurance transactions that made it appear as if AIG had legitimately increased its general loss reserves.

- A purported deal with an offshore shell entity that concealed multimillion dollar auto-warranty insurance underwriting losses.

- Economically senseless round-trip transactions that led to improper reports of gains in investment income.

- The purported sale of tax-exempt municipal bonds owned by AIG’s subsidiaries to trusts that AIG controlled in an effort to improperly recognize realized capital gains.

The allegations the SEC cited were based on the results of an investigation initiated by former New York Attorney General Elliot Spitzer. The results of that investigation led Greenberg and Smith to step down from their posts at AIG in 2005.

Current New York Attorney General Andrew Cuomo is still pursuing a civil case against Greenberg.

Greenberg says he is “pleased” with the settlement because the SEC has decided not to charge him with fraud despite a 4.5-year investigation “involving the review of millions of pages of documents and numerous depositions.”

Greenberg says the only charges made by the SEC against him were in connection with his role as a “control person” under a provision of the Securities and Exchange Act.

“As the SEC acknowledges, Mr. Greenberg does not admit even this claim, although he acknowledges the obvious fact that he was [chief executive officer] of AIG at the time of the accounting at issue,” according to a statement released by Greenberg’s representatives.

Greenberg has “consistently made clear that he personally never engaged in any fraud whatsoever, and that the vast majority of AIG’s restatement was unnecessary and concerned accounting issues for which he had no responsibility,” according to the statement.

But AIG believes the current settlement agreement “is an appropriate basis to resolve the SEC’s investigations and put these issues behind him,” according to the statement. “With these issues behind him, Mr. Greenberg looks forward to being able to concentrate on building for the future.”

Smith issued a separate statement through his lawyer, Vincent Sama.

“Some of the transactions in the Complaint filed by the SEC today are almost 10 years old,” according to Smith’s representatives. “Although Mr. Smith was originally inclined to litigate this matter, resolving the SEC matter allows him to move forward with his life without the added legal costs and distraction of this lawsuit.”