Complain about a product or service

New York Sues AIG

NY Suit Cites "Pattern of Fraud" at Nation's Largest Business Insurer

May 26, 2005
New York Attorney General Eliot Spitzer has filed a lawsuit against AIG, the nation's largest business insurance company, alleging that the firm manipulated its books to deceive regulators and the investing public.

AIG • AIG Annuities • AIG Auto Insurance • AIG Homeowners Insurance • AIG Life Insurance --- News • New York Threatens to Prosecute AIG for Fraud • NASD Fines AIG's American General $1.1 Million • AIG Faces Class Action Over Katrina Claims • Ohio Sues AIG • New York Sues AIG • AIG Faces Workers' Comp Audit

The lawsuit alleges that American International Group's former top management, including former Chairman Maurice R. Greenberg and former Chief Financial Officer Howard I. Smith, engaged in numerous fraudulent business transactions that exaggerated the strength of the company's core underwriting business to prop up its stock price.

"The irony of this case is that AIG was a well-run and profitable company that didn't need to cheat," Spitzer said. "And yet, the former top management routinely and persistently resorted to deception and fraud in an apparent effort to improve the company's financial results."

"The charges against AIG and two of its former executives are serious ones and the complaint includes compelling evidence that investors and regulators were misled over an extended period of time. Having said that, however, I believe AIG is taking steps to restore the company's credibility," said New York Insurance Superintendent Howard Mills.

The lawsuit, filed in State Supreme Court in Manhattan, attributes the misconduct at AIG directly to Greenberg. The suit cites e-mails and other evidence showing that Greenberg was personally involved in negotiating some of the fraudulent transactions, and that he directed other AIG staffers to develop and implement the schemes underlying other misleading transactions.

Specifically, the company and top management allegedly:

• Engaged in sham transactions with a reinsurance company to create the appearance of insurance reserves where none existed. These deals were personally conceived and negotiated by Greenberg;
• Hid underwriting losses from an auto warranty unit by transferring the losses to an offshore entity that it secretly controlled;
• Papered over losses in a Brazilian subsidiary by linking the losses to a Taiwanese subsidiary;
• Created false underwriting income derived from the purchase of life insurance policies; and
• Repeatedly deceived state regulators about AIG's ties to offshore entities.

The suit also cites a separate scheme in which AIG improperly booked worker's compensation premiums as general liability and other coverage. This misconduct reduced the company's taxes and other assessments.

AIG has already admitted that many of the transactions were improper, has terminated certain implicated personnel, and has announced plans to restate its earnings. The company is cooperating with authorities.

The suit alleges violations of New York's Martin Act, Executive Law and Insurance Law, plus common law fraud. In addition to injunctive relief, the suit seeks damages and disgorgement of profits from the illegal transactions.

Report Your Experience
If you've had a bad experience -- or a good one -- with a consumer product or service, we'd like to hear about it. All complaints are reviewed by class action attorneys and are considered for publication on our site. Knowledge is power! Help spread the word. File your consumer report now.

Back to the top |