The U.S. Securities and Exchange Commission has notified the former chairman and chief executive of American International Group, Maurice Greenberg, that it may bring charges against him for his alleged role in at least one phony accounting scheme, Mr. Greenberg's attorney confirmed.
Mr. Greenberg–who is now chairman and CEO of C.V. Starr–was sent what is known as a "Wells Notice," which offers the respondent an opportunity to provide a written statement addressing the charges before a decision is made whether to proceed.
One definite portion of the notice involves a 2001 reinsurance arrangement between AIG and General Reinsurance that a federal jury in February found to be a sham transaction, resulting in the conviction of five insurance executives on conspiracy and other charges.
U.S. District Judge Christopher F. Droney in Hartford, Conn., who presided at the trial, declared in a recent ruling that the government's evidence was sufficient for a jury to conclude that the conspiracy–which engineered a deal that would fraudulently boost AIG's financial picture–began with a phone call from Mr. Greenberg.
"This is a step in the process," Mr. Greenberg's attorney, Robert Morvillo, said in reaction to the government's move. "The issues have been narrowed down to a small number of issues. We remain confident of our position on the merits, and we believe that none of the remaining issues are material to AIG's financial statements. When the commission has had the opportunity to consider all the facts, we believe that they will agree."
A second questionable reinsurance deal is involved in the SEC's consideration of civil charges against Mr. Greenberg, according to a Wall Street Journal article, which reported that the SEC is also looking into a transaction between AIG and Capco Reinsurance Company, a reinsurer that was once controlled by AIG and is no longer in operation.
Citing the SEC, the newspaper reported that AIG allegedly used a deal with Capco to hide roughly $200 million in underwriting losses for AIG in order to make the insurer's losses "seem less embarrassing…"
Mr. Greenberg's legal team released a statement declaring that "AIG was involved in millions of transactions each year. Mr. Greenberg regularly relied on AIG's auditors, lawyers and other professionals to ensure that transactions were structured, executed and accounted for properly."
The SEC declined to comment, and Vincent Sama, an attorney representing former AIG Chief Financial Officer Howard Smith, who has also been given a Wells Notice by the SEC, did not return a phone call seeking comment.
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