Bureau denies targeting any specific company

By ARTHUR D. POSTAL

AND MATT BRADY

WASHINGTON

Prompted by the investigations into corrupt insurance industrypractices and accounting irregularities exposed by New YorkAttorney General Eliot Spitzer and other regulatory authorities,the Federal Bureau of Investigation has decided to probe whetherthese problems are endemic to the business.

At the same time, an FBI staff official in Washington said itwould be inappropriate to say that American International Group–themost prominent focus these days of Mr. Spitzer, the New YorkInsurance Department and the U.S. Securities and ExchangeCommission–is the target of the FBI inquiry.

The comments implied that while the probe of AIG is the currentheadline, prior investigations by Mr. Spitzer into contingency feespaid to property-casualty brokers to reward bid-rigging andsteering of commercial insurance accounts could also be examined bythe FBI.

“We're looking at the types of allegations made by the attorneygeneral's office in New York to see if there is any trend in theindustry,” the staff official said.

However, the FBI spokesman sought to remove what hecharacterized as some “confusion” regarding the bureau'sinvestigation and its focus. “A lot of people ran with the ideathat AIG is being investigated,” he said, but this is not the case.In fact, he said, the scope of the probe is industrywide, and it isnot aimed at any particular company. “There is no specificinvestigation,” he emphasized.

Earlier, a spokesman for AIG said he knew of no inquiries orsubpoenas by the FBI targeted at his company.

The AIG representative, Chris Winans, said he could not commenton the merits of the FBI's latest review. He said, however, that,“in general, we welcome any constructive effort aimed at improvingthe environment of the insurance industry.”

He added that “AIG is cooperating with government authorities tothe fullest extent possible, and that would include state, federaland regulatory authorities.”

In a report issued at the same time the FBI investigation wasdisclosed, the agency said fraud perpetrated within the industry isa major concern.

Indeed, the bureau said its review of the industry is focused oninsurance-related corporate fraud, “the diversion of policyholderpremiums for the personal benefit of agents and brokers, andworkers' compensation frauds that target pools of smallbusinesses.”

The agency said it is looking into the insurance industrybecause of its size and importance to the U.S. economy.

“The insurance industry consists of more than 7,000 companieswith over $1 trillion in premiums each year,” the FBI report said.“This is coupled with the direct link to rising insurancecosts.”

Insurance fraud for non-health coverages “costs the averagefamily between $400 and $700 per year, with a total cost exceeding$40 billion,” according to the FBI report.

Caption for FBI art:

“We're looking at the types of allegations made by the attorneygeneral's office in New York to see if there is any trend in theindustry,” said an FBI spokesman.