SEC Charges AIG’s Former Top Honchos

WASHINGTON (CN) – The SEC today charged American International Group’s former CEO Hank Greenberg and AIG’s former CFO Howard Smith with accounting fraud from “at least 2000 until 2005.” The SEC says the execs of the insurance giant now at the center of the world financial crisis juggled the books to avoid exposing “significant missteps in AIG’s operations and caused the company to miss certain key earnings and growth targets.

The federal complaint continues: “Greenberg, as a control person of AIG, and Smith, as AIG’s chief financial officer, were aware of transactions that enabled AIG to create the false impression that it consistently met or exceeded expectations for these key financial measures, and Smith knew or recklessly disregarded that AIG’s accounting for these transactions was not in conformity with generally accepted accounting principles (‘GAAP).
“The three primary areas of fraud were: (1) transactions with General Re Corporation (‘Gen Re’) in which AIG purportedly increased its loan loss reserves; (2) transactions with Capco Reinsurance Company Ltd. (‘Capco’), a special purpose entity AIG created and used to conceal underwriting losses by converting them improperly to capital losses; and (3) transactions to misstate net investment income or capital gains.”

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