The SEC today charged former American International Group Chairman and CEO Maurice “Hank” Greenberg and former Vice Chairman and CFO Howard Smith for their involvement in numerous allegedly improper accounting transactions that inflated AIG’s reported financial results between 2000 and 2005.
The SEC alleges in its complaint that Greenberg and Smith
were responsible for material misstatements that enabled AIG to create the false impression that the company consistently met or exceeded key earnings and growth targets. According to the SEC’s complaint, Greenberg publicly described AIG as the leader in the insurance and financial services industry with a history of delivering consistent double-digit growth. However, AIG faced numerous financial challenges under Greenberg’s leadership that were disguised through improper accounting.
The SEC says that Greenberg and Smith have agreed to settle the SEC’s charges and pay disgorgement and penalties totaling $15 million and $1.5 million, respectively.
Specifically, the SEC’s complaint filed in the SDNY charges the defendants with responsibility for the following improper accounting transactions:
- Sham reinsurance transactions to make it appear that AIG had legitimately increased its general loss reserves.
- A purported deal with an offshore shell entity to conceal multi-million dollar underwriting losses from AIG’s auto-warranty insurance business.
- Economically senseless round-trip transactions to report improper gains in investment income.
- The purported sale of tax exempt municipal bonds owned by AIG’s subsidiaries to trusts that AIG controlled in order to improperly recognize realized capital gains.
Greenberg is represented by Greg Morvillo of Morvillo, Abramowitz, Grand, Iason, Anello & Bohrer, P.C. Smith is represented by Andrew Lawler.