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AIG ex-Chairman, CEO Greenberg, and ex-CFO Smith Settle S.E.C. Charges

By Joel Zand on August 06, 2009 12:38 PM

Maurice Greenberg, the former American International Group ('AIG') Chairman and CEO, and Howard Smith, the company's ex-CFO and former Vice Chairman, were sued by the S.E.C. for their alleged roles in "improper accounting transactions that inflated AIG's reported financial results between 2000 and 2005."

While there are numerous allegations of wrongdoing in the complaint, the S.E.C. simultaneously settled all charges against the two, requiring them to pay fines, penalties, and more.

The complaint accused (shown below) Greenberg and Smith of engaging in the following improper accounting practices:

    • Sham reinsurance transactions to make it appear that AIG had legitimately increased its general loss reserves.
    • A purported deal with an offshore shell entity to conceal multi-million dollar underwriting losses from AIG's auto-warranty insurance business..
    • Economically senseless round-trip transactions to report improper gains in investment income..
    • The purported sale of tax exempt municipal bonds owned by AIG's subsidiaries to trusts that AIG controlled in order to improperly recognize realized capital gains.

Greenberg consented to a judgment ordering him to pay a penalty of $7.5 million and disgorgement of $7.5 million, and enjoining him from violating various federal securities laws.

Smith consented to paying a penalty of $750,00, disgorgement of $750,000; prohibiting him from acting as an officer or director of any public company for three years; barred from appearing or practicing before the S.E.C. as an accountant for five years; and also enjoining him from violating various federal securities laws.


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