A consortium of California worker and consumer advocacy groupsyesterday demanded that the state investigate their claims thatAmerican International Group has defrauded the state by denyingcare and payments to injured workers.

At a news conference outside the Los Angeles office of Gov.Arnold Schwarzenegger, the groups--including the Foundation forTaxpayer and Consumer Rights, the Consumer Federation of Californiaand VotersInjuredatWork.org--accused AIG of cheating the state andinjured workers out of millions of dollars.

The organizations demanded a complete audit of the company'sactions as well as payment of any money it may have withheld.

"AIG is cheating injured workers out of their medical care andcompensation, and may have cheated taxpayers out of tens ofmillions of dollars through the insurance fraud," said Mark Hayes,president of VotersInjuredatWork.org.

Insurance companies, said Mr. Hayes, "manipulate their books andmanipulate the system to avoid paying injured workers for care andcompensation."

In addition, the groups criticized Gov. Schwarzenegger, sayinghe was turning a blind eye to AIG's actions. The governor'sinaction, they said, was due to hefty political contributions madeby the company and its executives.

"Gov. Schwarzenegger never stands up to his donors, and AIG hasgiven him nearly $150,000," said Doug Heller of the Foundation forTaxpayer and Consumer Rights. "That's why the governor has notcalled AIG to account for apparently defrauding the state'staxpayers and businesses, and it's why he has sat back and let AIGcheat injured California workers."

A spokesman for the governor responded by noting that theauthority to investigate an insurance company is in the hands ofthe state insurance commissioner rather than the governor, and thatthe issue of donations was not relevant.

Norman D. Williams, a spokesman with the California Departmentof Insurance, issued a statement at the press conference explainingthat an investigation of AIG's actions is already underway.

"We are, and have been, aggressively investigating AIG for morethan a month," Mr. Williams said in the statement. "This is a jointinvestigation with the New York State Insurance Department, whichis the lead regulator of that company. Once we gather all of theinformation and determine what AIG has done, we will announce theresults."

In April New York Attorney General Eliot Spitzer and InsuranceSuperintendent Howard Mills said AIG had cheated New York out of"tens of millions" owed the state's workers' compensation fund overmore than a decade.

The New York officials said the practice to be audited, now"apparently" discontinued, involved booking premiums for workers'comp coverage as premiums for general liability coverage. They saidthe activity appears to have gone on for more than 10 years andcontinued even after AIG insiders repeatedly challenged itslegality.

AIG said in April that the activity involved had generally beencorrected eight years ago.

Chris Winans, a spokesman for AIG, declined to comment yesterdayon the labor and consumer groups' allegations. He said that AIG iscooperating with all investigations of the company, "to the fullestextent possible."