Would you buy this company?
This report by Rebecca Brenza it is excellent, by the way the report indicates that AIG was ripe with corruption many years ago and the only way to get rid of AIG was leave it on the taxpayer's front porch in the middle of the night.
Insurance Fraud at AIG
Who is this man?
None of the above
Eliot Spitzer is a name that will come up throughout the presentation so who do you think Eliot Spitzer is?
Resigned as the Governor of New York in 2008
New York Attorney General for 8 years who was brilliant at prosecuting Wall Street fraud
Client 9 of a prostitution ring
Son of a multimillionaire real estate developer
All of the above
Fraud: Not a New Issue
Other large companies have been found guilty of fraud
American International Group Inc.
?We Know Money?
Largest U.S. commercial insurer
Does work from insurance to asset management in 130 countries
Main customers are businesses, but it also sells life and property insurance to individuals
One of the largest, most profitable companies in the world
Known for its steady earnings growth
CEO: Maurice ?Hank? Greenberg
World?s biggest reinsurance buyer
Shareholders? equity 2007: $95.80 billion
Annual Net Income
2004: $9.84 billion
2005: $10.48 billion
2006: $14.05 billion
2007: $6.2 billion
Initial Warning Signs at AIG
A company founded in 1987 called Coral Reinsurance in Barbados only had one customer: AIG
In 1991, Coral Re held more than $1 billion in estimated losses from AIG but only had $15 million in capital
Regulator?s became convinced that Coral Re was under AIG?s control and no real risk was being transferred
AIG eventually agreed to stop its business with Coral Re, but AIG never admitted Coral Re was an affiliate and never was fined
Initial Warning Signs at AIG cont?
Eliot Spitzer named AIG as a participant in a bid-rigging scheme with other major insurers and insurance broker Marsh & McLennan Cos.
2 former AIG employees pleaded guilty in the scheme
Marsh & McLennan?s CEO at the time was AIG CEO Maurice R. ?Hank? Greenberg?s son (Jeffrey Greenberg)
AIG?s Previous Fraudulent Encounters
Small mobile phone distributor
PNC Financial Services Group Inc.
Pittsburgh banking company
AIG helped Brightpoint design a retroactive ?insurance policy? to spread out losses that should have been recognized immediately
SEC accused AIG of both fraud and helping Brightpoint falsify its earnings in 1998
Overstated earnings by 61%
Hid some of Brightpoint?s $29 million in losses
Fraud surfaced in 2003
AIG agreed to pay $10 million fine in a settlement of civil charges with the SEC
PNC Financial Services Group Inc.
AIG helped PNC Financial Services create 3 special-purpose, off-balance-sheet investment vehicles in 2001
SEC charged that AIG acted as a counterparty to move $762 million of underperforming loans or volatile assets off PNC?s balance sheet
Brightpoint and PNC Financial Services
In both cases, AIG helped these companies hide adverse financial developments from their shareholders
AIG never admitted or denied wrongdoing in either case
Settlement- AIG pays:
$80 million penalty to the Justice Department
$46 million to a SEC restitution fund
Additional Provision of Settlement
Provision of settlement requires AIG to hire an independent consultant jointly chosen by the company, the SEC, and the Justice Dept. to review certain transactions between 2000 and 2004 to determine whether they were used to violate accounting rules or manipulate financial results
When asked about the regulatory environment Greenberg said the crackdown was excessive and ?When you begin to look at foot faults and make them into a murder charge, then you have gone too far."
AIG?s own accounting goes under review
New York Attorney General Eliot Spitzer and the SEC had been focusing on the relationships between AIG and their clients
Now focus is shifting to AIG?s own financial statements
Regulators are interested in whether AIG has aided their own results with the techniques they pioneered and marketed in years past
AIG maintains its own accounting is not an issue
Could AIG be manipulating its own earnings and/or balance sheet?
Regulators gain interest in AIG and transactions it has had with General Re possibly dating back 3 or 4 years
What is General Re?
A reinsurance company that is part of Berkshire Hathaway and is owned by Warren Buffett
A electric company based in Dublin that bought ?insurance? from AIG
An insurance company owned by Eliot Spitzer
A reinsurance company that is a subsidiary of AIG
None of the above
AIG/General Re Deal
Regulators focus on a deal AIG cut with General Re, a reinsurance company
Investigators say AIG bought insurance from General Re and accounted for it in a way that overstated revenue
AIG Fesses Up!
AIG admits to:
using insurers in Bermuda and Barbados that were secretly controlled by AIG to bolster its financial results, including shifting some liabilities off its books
a broad range of improper accounting that could slash its net worth by $1.77 billion
improperly accounting for a reinsurance transaction with Berkshire Hathaway Inc.?s General Re in 2000-2001
After the admission
Investigators now are examining actions of top AIG officials
The SEC could bring civil fraud charges against the company or executives
AIG?s shares fell 1.8% continuing to slide
On Feb. 14, 2005 AIG?s shares are down 22% since closing on Friday, Feb. 11
After the admission cont?
Standard & Poor?s and Moody?s downgraded AIG?s long-term bonds and certain other debt by a notch from its top AAA and Aa1 rating
A.M. Best put AIG under review with ?negative? implications
Fitch Ratings put AIG under ?Rating Watch Negative?
After the admission cont?
Company says accounting problems probably will not deplete its net worth (shareholders? equity) by more than 2%
AIG CEO ?Hank? Greenberg resigns in March 2005 and retired as AIG?s chairman days later
How and why?
How and why did AIG use insurers in Bermuda and Barbados that were secretly controlled by AIG to bolster its financial results, including shifting some liabilities off its books?
Offshore Reinsurance Deals
Richmond Insurance Co.
Union Excess Reinsurance Co.
Capco Reinsurance Co.
Richmond Insurance Co.
A Bermuda-based reinsurance company that AIG transferred hundreds of millions of dollars in liabilities to in recent years
AIG owns 19.9% of this company, but AIG?s internal review found that AIG controlled the company
Richmond shares a mailing address with AIG?s Bermuda offices and is managed by a unit of AIG
Richmond Insurance Co. cont?
If a reinsurer is wrongly classified as unaffiliated, that means that any policy claims counted as being covered by the reinsurer are actually the original insurer's own liabilities
AIG says the financial impact of consolidating Richmond will be minimal
Union Excess Reinsurance Co.
Barbados based reinsurance company in which AIG had done business that was similar to Richmond
AIG does not own stake in Union Excess, but a significant part of the ownership interests are protected under agreements with Starr International Co.
Union Excess Reinsurance Co. cont?
Transactions generated income
Allowed AIG to reflect lower obligations on its own balance sheet because of differences in accounting between Barbados and the U.S.
Consolidating Union Excess would reduce AIG?s net worth by $1.1 billion
Capco Reinsurance Co.
Another reinsurance company in Barbados that AIG had transactions with to help improperly characterize losses on insurance policies as another type of loss
Capco should have been treated as a subsidiary of AIG
Capco Reinsurance Co. cont?
AIG has had some of the lowest underwriting losses in the industry and wanted to keep it that way
AIG will have to restate $200 million of the other losses as underwriting losses from its auto-warranty business
Other problems identified
Underreporting premium income from workers? comp policies
How and Why?
How and why did AIG improperly account for a reinsurance transaction with Berkshire Hathaway Inc.?s General Re in 2000-2001?
Reinsurance Deal with General Re
In late 2000 and 2001, Gen Re shifted $500 million of expected claims to AIG along with $500 million of premiums
Gen Re accounted for this transaction properly
AIG recorded the premiums as revenue and added $500 million to its reserves to show its obligation to pay claims
The transaction was improperly recorded by AIG as a reinsurance deal when it was more like a loan
If AIG was receiving the premiums to ensure that it didn't lose anything in the deal, then it faced no risk
AIG wasn't really insuring anything and the $500 million shouldn't have been treated as premium revenue
Loan vs. Reinsurance
If not enough risk is transferred it is considered a loan and not an insurance policy
Accounting for reinsurance policies is more favorable than that for loans because insurers can use reinsurance proceeds to offset their losses
Proceeds from loans cannot be used to offset losses; instead, loans have to be counted as liabilities
Why would AIG do this?
Some AIG shareholders were questioning whether the insurance company had enough money set aside to cover potential claims
AIG has an outstanding record of earnings growth, and perhaps an obsession to keep that record intact led to the decisions to fudge the books
Raise its stock price
Significant issue for General Re
Did General Re aid AIG with the improper accounting?
Buffett's firm can't be held responsible if it merely sold a product--the loss portfolio--to AIG that was later misused
Considers Buffett a witness in the probe
Focusing investigation on AIG and its former CEO Maurice (Hank) Greenberg
Examining whether Buffett or others at his company had any knowledge that the AIG transaction was being used improperly
Is Possible Failed Regulation to Blame?
State regulators failed
Outside auditors failed
Financial industry specialists failed
Future solution: national regulation???
May 2005 update
AIG would restate more than 4 years of financial statements which will reduce its net worth $2.7 billion
AIG?s current management said there were issues with its internal controls
AIG?s stock has fallen 30%
New issues arise
May 2005 update cont?
Elizabeth Monrad, John Houldsworth, and Rick Napier each received a Wells Notice from the SEC notifying them that they could face securities-fraud charges due to their work at General Re
At the end of May, AIG restated 5 years of financial results reducing its net income by 10%
First formal charges
At the end of May 2005, New York state authorities sued AIG, former CEO Maurice R. ?Hank? Greenberg, and former CFO Howard I. Smith
These are civil charges and not criminal charges, but criminal investigation of individuals still continues
Guilty pleas from Gen Re execs
2 guilty pleas to one count of conspiracy to file false financial reports, falsify books, records, and accounts and mislead auditors in connection with the Gen Re-AIG deal
John Houldsworth, former CEO of Ireland-based Gen Re unit Cologne Re Dublin
Richard Napier, former senior vice president of Gen Re
AIG resolves allegations by reaching a $1.64 billion settlement
AIG will also have to submit to additional reinsurance reporting and financial reporting
The settlement does not resolve the cases against Greenberg or Smith
AIG has not admitted or denied allegations
AIG also faces a $1.1 billion after-tax negative reserve development
3 Gen Re executives and 1 AIG executive plead innocent to 16 counts including conspiracy, securities fraud, false statements to the SEC, and mail fraud
Ronald Ferguson: former CEO at Gen Re
Betsy Monrad: Gen Re's former chief financial officer
Robert Graham: former Gen Re assistant general counsel
Christian Milton: AIG's former vice president of reinsurance
1 Gen Re executive is charged on 10 counts
Christopher P. Garand: Gen Re?s senior vp and chief underwriter for finite reinsurance operations from 1994 to 2005
Ferguson, Graham, Milton, and Monrad each face up to 230 years in prison and $46 million in penalties if convicted of all charges outlined in the indictment
Mr. Garand faces a maximum term of 160 years in jail and a fine of up to $29.5 million
What has been happening recently?
Eliot Spitzer became the governor of New York and recently resigned after he was caught being part of a prostitution ring
New Attorney General in NY taking Eliot Spitzer?s place in the case is Andrew Cuomo
The National Workers Compensation Reinsurance Pool, which represents 600 insurers, sued AIG in May 2007 in U.S. District Court for the Northern District of Illinois seeking additional funds from AIG
New York-based AIG filed its own suit against NWCRP last week in New York claiming, among other things, that it is not responsible for any amount in excess of its 2006 settlement.
What has been happening recently in the trial?
Ferguson, Graham, Milton, and Monrad are all convicted on the 16 counts
Garand is convicted on 10 counts
The most compelling evidence in the trial were taped phone conversations and emails
Lawyers for the five defendants convicted said they intend to appeal
Following the verdicts, the judge set May 15, 2008 for sentencing and released each of them on a $1 million bond
What has been happening recently?
The investigation is still continuing and more indictments may come
Mr. Greenberg and Mr. Brandon (current CEO of Gen Re) still face no criminal charges
Warren Buffett is not charged with anything and is no longer being investigated
US legal system can be very unpredictable
Some individuals involved with very serious fraud are acquitted
Others charged with less serious fraudulent activities can face lengthy prison terms
To be safe, always consider the impact of any conversation you have being made public
You never know when you are being recorded
Laughing about financial regulations may get you convicted of a felony - if the wrong person is out to get you or someone you work with
The states simply made AIG promise to report any similar reinsurance transactions in the future. That appeared to be the end of AIG's problems with questionable links to offshore reinsurers. In truth, it was only the beginning. An AIG division reported that it had transferred large pieces of reinsurance from Coral Re to a Barbados company called Union Excess.
Eliot Spitzer cited Fortune Brands (sells home/office products, wine/spirits, etc.) as a victim of the bid-rigging. Marsh directed underwriters at ACE Ltd. (headed by Evan Greenberg, Maurice Greenberg?s other son) to raise their quote on excess liability coverage for Fortune Brands to keep it from competing with a unit of American International Group Inc. In an internal email it was stated by ACE "We were more competitive than AIG in price and terms. (Marsh) requested we increase premium to $1.1 million to be less competitive, so AIG does not (lose) the business." Mr. Spitzer has charged that insurers intentionally produced inflated quotes and lost business in the alleged Marsh bid rigging, knowing that they would later win other accounts from the broker. New York Attorney General Eliot Spitzer sued MMC, charging the broker with steering clients to insurers paying Marsh the highest contingent commissions and rigging bids on client programs. Mr. Spitzer?s investigation has produced 9 guilty pleas in total so far. The younger Mr. Greenberg was forced from his post as the chief of Marsh & McLennan Cos. after Mr. Spitzer publicly said he wouldn't deal with the company during a bid- rigging probe of its insurance brokerage if Mr. Greenberg was in charge.
AIG worked hand-in-hand with Brightpoint personnel to custom design this ?insurance policy.? Basically, money just transferred from Brightpoint to AIG back to Brightpoint, no risk was transferred). By disguising the money as insurance AIG enabled Brightpoint to spread a loss that should have been recognized immediately out over several years (Brightpoint would pay monthly premiums to AIG for 3 years, but during the time AIG paid the money back in the form of insurance claims, Brightpoint recorded the payments as insurance receivables to offset its losses). AIG also withheld documents and committed other abuses which made its misconduct worse. AIG?s profit from this policy was less than $100,000.
AIG again helped clients deceive investors by selling insurance products or creating off-balance-sheet vehicles that have the effect of downplaying losses or overstating earnings. This let PNC show earnings that were 52% more then they would have been without these special purpose vehicles. These investment vehicles allowed PNC to dump assets into them that they expected to deteriorate. AIG also contributed funds to these vehicles. AIG resisted requests for documents, emails, and other information the SEC and Justice Dept. requested and downplayed the seriousness of investigations in public statements. AIG, from the firm?s management fees for the first year, made $8.1 million from the PNC transactions.
As part of the settlement, the Justice Department also said it would defer prosecution on its criminal complaint for 13 months and eventually dismiss the complaint if AIG and its subsidiaries fully comply with the obligations set forth in the agreement. The settlement does not apply to Eliot Spitzer's ongoing probe of the insurance industry, which includes scrutiny of loss mitigation products.
Spitzer addressed the AIG chief's comments. "Hank Greenberg should be very, very careful talking about foot faults," he warned. "Too many foot faults, and you can lose the match. But more importantly, these aren't just foot faults.? Although it wouldn't be publicly disclosed for five more days, that very evening Spitzer's office was serving AIG with the subpoena that would end Greenberg's career.
Starting to investigate nontraditional insurance products and certain assumed reinsurance transactions and AIG's accounting for such transactions. AIG in February 2005 had announced it was subpoenaed by the U.S. Securities and Exchange Commission and New York Attorney General Eliot Spitzer's Office in an investigation of non-traditional insurance products that investigators said might have been used to improperly improve the company's financial picture. Investigation is beginning to focus on AIG?s own use of finite risk coverages. The SEC has also requested information on the use of finite risk products from other companies, including General Re Corp., Chubb Corp., ACE Ltd. and Swiss Reinsurance Co. This may be the first time regulators are investigating these products' impact on an insurer's own book, rather than on its clients'.
Mr. Spitzer and the SEC subpoenaed Berkshire Hathaway Inc., the insurance-holding company run by billionaire investor Warren Buffett. The Omaha, Neb., company said the subpoenas sought documentation and information relating to nontraditional or loss-mitigation insurance products from its General Re unit and the unit's affiliates. Some of the "alternative risk" transactions that regulators are looking into across the industry allow insurers to improve their balance sheets in the short run either by moving some of their claims reserves to another insurer, or taking on another company's reserves. Such arrangements can violate accounting rules if sufficient risk isn't transferred.
General Re is a subsidiary of Warren Buffett's Berkshire Hathaway.
In March 2005, AIG said for the first time that the 2000-01 transaction with General Re was improperly recorded as a reinsurance deal. At the time, some AIG shareholders were questioning whether the insurance company had enough money set aside to cover potential claims, known as reserves. Under the transaction, AIG shifted $500 million of expected claims to itself from General Re, along with $500 million of premiums. AIG booked the premiums as revenue, and then added $500 million to its reserves to reflect its obligation to pay the claims. If AIG was receiving the premiums to ensure that it didn't lose anything in the deal, then it faced no risk. In that case, it wasn't really insuring anything and the $500 million shouldn't have been treated as premium revenue. General Re received a $5 million commission for the deal. For its part, General Re did not treat the transaction as an insurance policy; instead, it booked it as a finance deal, people familiar with the matter have said. The more significant issue for General Re is whether it aided any improper accounting at AIG. Authorities are scrutinizing General Re on that issue and may be spurred further by yesterday's AIG statement, although the statement didn't discuss whether General Re bore any responsibility for the transaction's problems.
Shareholders? equity would still be above $80 billion. Mr. Greenberg had been running AIG for nearly four decades and was responsible for moving AIG into China which is now one of its most promising regions. Many say Mr. Greenberg was the most powerful executive in the history of insurance. Mr. Greenberg took AIG from $300 million market value to about $160 billion. However, Spitzer praises AIG for changing some top management.
A call from National Underwriter to the Richmond office was answered with the greeting "AIG," which perhaps illustrates AIG's close involvement with the reinsurer.
Starr International Co. is a closely held firm that owns nearly 12% of AIG's shares and is owned and run by current and former AIG executives, including Mr. Greenberg. Since its inception in 1991, most of Union Excess' reinsurance business came from AIG, which could invite undue influence from the insurer as well.
AIG had done transactions with Union Excess for 14 years from 1991-2004.
AIG booked $300 million in gains on its bond portfolio from 2001-2003 without actually selling bonds. If it had waited to book the income until it sold the bonds, the income would have come later and been counted as "realized capital gains.?
Money owed to AIG by other companies for property-casualty insurance policies may not be collectible. The company said that could result in an after-tax charge of $300 million.
Potential problems with AIG's accounting for the up-front commissions it pays to insurance agents and similar items might force it to take an after-tax charge of up to $370 million.
AIG also will begin recording an expense on its books for compensation paid to its employees by Starr International, the private company run by current and former executives. Starr has spent tens of millions of dollars on a deferred- compensation program for a hand-picked group of AIG employees in recent years.
Underreporting its premium income from workers' compensation policies enabled AIG to undercontribute to worker's compensation funds and underpay taxes on workers' comp premiums.
Gen Re received a $5 million commission for the deal.
These transactions were done to improve reported financial results. However, AIG's transactions were not intended to mask a slide to insolvency. In the transaction, AIG took over $500 million in potential claims, known as a "loss portfolio," from General Re, along with about $500 million in premiums. One insurance company can legitimately transfer risk to another, but in this case, it appeared that AIG was assuming no risk. The company admitted in a press release that "in light of the lack of evidence of risk transfer, these transactions should not have been recorded as insurance."
It certainly wasn't because AIG was unable to underwrite risks profitably.
But questions have been raised as to whether there was a separate side agreement that made it clear that AIG was assuming no risk. Then, critical problems would arise for General Re. If General Re knew about this improper accounting, was Warren Buffett involved? Berkshire stated that Buffett was "not briefed on how the transactions were to be structured or on any improper use or purpose of the transactions." The company stressed that Buffett speaks infrequently with his business unit managers and leaves operating decisions to them.
Spitzer is definitely the toughest cop on Wall Street, but the SEC is becoming more aggressive and determined as well. Is the "Spitzer Effect" lasting and real? Some observers suggest the one-upmanship among agencies may soon die down now that Spitzer is running for governor of New York in 2006. Eliot Spitzer, attacked the former CEO, Hank Greenberg, on national television, saying "the evidence is overwhelming" that a series of transactions completed by the company under Greenberg's watch constituted "fraud," and that Greenberg could face criminal charges. Spitzer has been criticized for his comments about Greenberg--editorials have argued that Spitzer was convicting him before all the facts were in. However, what's emerging from the probes is a portrait of failed regulation. After the Coral Re dispute, these sources say, AIG pledged in writing to reveal any ties with its reinsurers -- and filed statements certifying the independence of specific companies that it now acknowledges controlling or backing.
The $1.2 trillion insurance industry is overseen by small state offices who are not equipped to detect multistate or international scams. State regulators defend the job they've done. The problem, they say, is that insurers lied to them. Outside auditors didn't penetrate AIG's structure to detect supposedly independent reinsurers that AIG now says it secretly controlled, or hidden side agreements between insurers. Nor did the financial industry specialists who reviewed the insurers' filings at the SEC. After the Coral Re dispute, AIG pledged in writing to reveal any ties with its reinsurers -- and filed statements certifying the independence of specific companies that it now acknowledges controlling or backing. Still, critics contend that the fragmented system of state regulation lacks the checks that can expose frauds before they compound. To coordinate efforts, state regulators have banded together in the National Association of Insurance Commissioners. But the NAIC doesn't regulate or investigate.
The company said it would restate financial statements for 2000, 2001, 2002 and 2003 and for 2004's first, second and third quarters. AIG's stock, long a Wall Street darling, has fallen 30% since its disclosure on Valentine's Day that it had received subpoenas from regulators. The company's internal investigation uncovered instances where AIG quickly shifted money in and out of hedge funds near the end of financial reporting periods. Regulators believe this strategy was designed to burnish AIG's results. There are instances in which so-called derivative trades, such as futures contracts that allow investors to bet on currencies, was "incorrect" under Financial Accounting Standards Board's rule 133. The rule governs how companies measure the value of and returns on derivatives. Regulators suspect the insurer may have used favorable "hedge" accounting for derivatives positions that weren't initially intended to hedge a specific risk.
Ms. Monrad was the chief financial officer at Gen Re, Mr. Houldsworth is chief underwriter for General Re's reinsurance unit in Dublin, and Rick Napier, a senior vice president at Gen Re. Regulators are focusing on a conference call that took place in November 2000 between Ms. Monrad, Mr. Napier and two AIG executives, as evidence of Ms. Monrad's knowledge of AIG's plans to commit the fraud. In addition, the SEC has zeroed in on steps both executives took to create a so-called paper trail of false documents justifying the transaction.
The goal, the suit contends, was to exaggerate the strength of the company's core underwriting business, propping up the price of one of the nation's most widely held stocks. The lawsuit, filed in the state court in Manhattan and seeking damages and disgorgement of any illegal profits, alleges a range of improper accounting and activities. This civil lawsuit was filed by New York Attorney General Eliot Spitzer and New York State Insurance Superintendent Howard Mills. The lawsuit revealed little new material information against AIG that hadn't already been made public, and its primary focus was Greenberg and Smith, rather than the company itself or current management. Mr. Spitzer backed off seeking possible criminal charges against Mr. Greenberg in June.
John Houldsworth, former chief executive officer of Ireland-based Gen Re unit Cologne Re Dublin, and Richard Napier, former senior vp of Gen Re in Stamford, Conn., each pleaded guilty to one count of conspiracy to file false financial reports, falsify books, records and accounts and mislead auditors in connection with the Gen Re-AIG deal. The plea agreements with the Department of Justice were filed in U.S. District Court in Alexandria, Va. Both men separately settled civil charges filed by the Securities and Exchange Commission.
The $1.64 billion is to settle state and federal charges of securities fraud, bid-rigging and failure to pay proper contributions to various state workers' compensation funds.
Under the terms of the settlement, AIG will pay $800m to a fund for investors deceived by its false financial statements and a fine of $100m.
Policyholders affected by AIG's bid rigging will receive $375m, and a further $344m will go to states harmed by AIG's understatement of workers' compensation premiums. The company will also pay a fine of $100m and a $25m penalty to the Justice Department.
Industry observers concurred the $1.64 billion settlement, which is one of the largest-ever regulatory fines assessed on a single corporation--shouldn't hinder the company.
In an amendment filed Sept. 2006 in New York State Supreme Court, the authorities removed AIG as a defendant. Additionally, they dropped an allegation relating to underpayment of contributions to state workers' compensation plans -- for which AIG had already pledged restitution. Authorities continue to charge that Mr. Greenberg and Howard I. Smith misled investors with sham transactions that artificially boosted AIG's reserves and disguised underwriting losses. But the suit eliminates previous allegations that the two executives guided AIG schemes to avoid state workers compensation premium taxes and to conceal AIG's control of several offshore entities.
The four former executives of General Re and American International Group (AIG) who were indicted in February 2006 by the US Department of Justice and Securities and Exchange Commission have pleaded not guilty to charges of fraud.
Fred Hafetz, a lawyer for Mr. Milton, the only defendant who worked for AIG, said he believes his client was denied a fair trial when he was prosecuted with the four former General Re executives. None of the defendants testified. The case hinged largely on emails and taped phone conversations in which the defendants could be heard clearly discussing details of the deals, laughing about financial-reporting rules and even poking fun at AIG's accounting practices. Several observers expressed surprise that the jury found all five defendants guilty on all counts despite their varying degrees of involvement in the reinsurance deal, saying they had expected a split verdict, a hung jury or acquittals on some counts.