AIG close to $1.5B settlement, reports say
NEW YORK » American International Group Inc., the giant property-casualty insurer under investigation for deceptive accounting practices, is close to reaching a $1.5 billion deal with federal regulators to settle the allegations, the Wall Street Journal and New York Times reported yesterday.
The Journal quoted unnamed "people familiar with the matter" as saying the deal, which could be announced as early as this week, would settle investigations by the Securities and Exchange Commission, New York State Attorney General Eliot Spitzer and the New York State Insurance Department.
The Journal said the payment of at least $1.5 billion "would include disgorgement of allegedly ill-gotten gains and penalties." The New York Times put the cost of the settlement at about $1.6 billion, quoting "two people briefed on the negotiations."
Christian Murray, spokesman for New York-based AIG, said the company had no comment on the reports.
There was no immediate comment from Spitzer's office or the SEC.
In afternoon trading, AIG shares rose 66 cents to close at $66.01 in trading on the New York Stock Exchange. AIG shares have traded in a range of $49.91 to $73.80 over the past 52 weeks.
Spitzer accused AIG and two former top executives on May 26 of using unacceptable accounting tactics to make the company's financial performance appear better than it was, misleading both investors and regulators. The suit in state Supreme Court in Manhattan also alleges that AIG's former chief executive officer, Maurice "Hank" Greenberg, and former chief financial officer, Howard I. Smith, orchestrated the scheme.
Greenberg, who resigned from AIG in March, has repeatedly insisted that he followed proper accounting procedures during his 38 years at the helm of AIG. Smith too has denied wrongdoing.
Howard Opinsky, a spokesman for Greenberg, said yesterday that "shareholders lose when companies choose to settle investigations that are motivated by political ambition, fueled by threats and settled out of fear."
"Even if all the allegations were to be believed, a settlement of this magnitude is totally disproportionate to the impact of the alleged misconduct," he said. The company, operating under its new CEO, Martin J. Sullivan, last year restated AIG's earnings back to 2000, cutting shareholder equity by some $2 billion.