Analysts Unfazed By AIG Probe

The AIG settlement involved paying $80 million to the U.S. Department of Justice Fraud Section and $45 million to the Securities and Exchange Commission to settle charges that it helped two client companies structure deals that violated accounting rules.

At issue were transactions that helped improve the income statements of Brightpoint–a Plainfield, Inc. mobile phone distributor, and PNC Bank in Pittsburgh.

AIG, which previously paid a $10 million fine to the SEC over the Brightpoint case, said under its agreement it was neither admitting nor denying wrongdoing.

In that case the company was accused of providing what was essentially a loan disguised as insurance. With PNC it was alleged the company helped the bank disguise bad loans.

AIG said the SEC monitor for the company–which it called "an independent consultant"–would review other company transactions between 2000 and 2004 to see whether they involved other income-smoothing product sales.

The company said the monitor would be agreed to by SEC, Justice Department and AIG, and that in addition to a review, would examine policies and procedures of a transaction review committee that the company agrees to put in place.

Its agreement with the Justice Department ends a federal grand jury probe that had been underway in Indiana.

The Wall Street Journal story said that Mr. Greenberg was under scrutiny by David N. Kelley, U.S. Attorney for New York's Southern District in Manhattan, for possible illegal interference with the company's share price.

The probe was said to concern whether in 2001 Mr. Greenberg illegally secured the help of then New York Stock Exchange Chairman Dick Grasso to keep AIG's stock trading above a trigger price that would have required the insurer to pay more for the acquisition of American General Corp. in Houston.

According to the Journal's unidentified sources, when Mr. Greenberg was unsuccessful reaching Mr. Grasso, "an underling" in Mr. Grasso's office relayed a request for action to floor traders overseeing AIG stock.

The floor specialist firm involved was Spear Leeds & Kellogg, a unit of Goldman Sachs Group, the Journal said. A spokesman for Goldman Sachs said the firm had no comment.

At Standard & Poor's, analyst Grace Osborne said a monitor, "to the extent they are able to validate transactions, would help to dismiss the clouds they [AIG] are currently under."

She said when she spoke with AIG, officials there had told her that Mr. Greenberg had not been notified of any assertions against him by the Justice Department. "We need a better perspective on what the facts are and the extent of what the facts are," she said.

At UBS Investment Research, analyst Andrew Kligerman reiterated a "buy 1″ rating, and wrote that his firm expects the resolution of SEC and Justice Department investigations, "including manageable penalties" would "outweigh today's negative headlines on an inquiry of Mr. Greenberg."

Prudential Equity Group reiterated an "overweight" rating for AIG, and said business practice changes as a result of the settlement should not substantially impact AIG revenues, and that pending more information, it would not revise earnings estimates.